The Real Estate Cycle and Real Business Cycle: Evidence from Thailand

Abstract

This paper estimates the real estate cycle in Thailand. From the estimated results, we find that duration of the expansion period in the real estate cycle in Thailand was approximately 25.25 months while the contraction period lasted much longer (44.00 months). The duration of the trough-to-trough cycle is estimated to be approximately 69.25 months. The significant leading indicators for the real estate cycle are construction price index, money supply (M2), property stock index and post-credit finance. Compared to Thailand's economic cycle, the real estate cycle leads the trough and the peak in the business/economic cycle by approximately 14.3 months and 20.3 months respectively. In expansion periods, the real estate cycle is always found to lead the business/economic cycle. However, it is not clear that in contraction periods the real estate cycle leads the business cycle. This finding differs from that of previous studies. We found that real estate crises led to economic crises in the early 1980s and in 1997, while in other contraction periods it was an economic recession that led to a contraction in the real estate sector.