(Un)expected housing price changes: Identifying the drivers of small business finance

Pavel Kapinos, Tami Gurley-Calvez, Kandice Kapinos

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

In this paper, we use the Kauffman Firm Survey to examine the effect of housing price changes on small business financial variables. We apply macroeconomic forecasting techniques to decompose housing price changes into expected and unexpected components. In addition to investigating the effect of predictable and unpredictable movements in housing prices, we argue that our use of forecast errors allows us to identify plausibly exogenous variation in housing prices. We show that for several measures of small business financing, the unexpected housing price changes have particularly large effects on small business balance sheets. Analysis of specific measures of credit access points to the channels of transmission of housing market disruptions on small business outcomes and suggests that small business owners absorb negative shocks to housing wealth through relatively expensive sources of credit and not through loans from the banking sector. We conclude with policy proposals for reducing the effect of housing market disruptions on small businesses.

Original languageEnglish (US)
Pages (from-to)79-94
Number of pages16
JournalJournal of Economics and Business
Volume84
DOIs
StatePublished - Mar 1 2016
Externally publishedYes

Keywords

  • Forecasting
  • House price changes
  • Small business finance

ASJC Scopus subject areas

  • General Business, Management and Accounting
  • Economics and Econometrics

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