Determinants Of Fluctuations In House-Building In Denmark 1880–1940

Abstract

During the inter-war period it became gradually accepted by most Danish economists and politicians that house-building is very sensitive to short-run variations in the long-term interest rate. The introduction of this view was probably mainly due to two circumstances: one was the heavy building crisis in 1907–8 accompanied by bank failures and shortage of money; another was the impact of Wicksell’s theories on Danish economists. Since then it has been accepted almost as a matter of fact that house-building must be influenced strongly by short-term fluctuations in the long-term interest rate. Reference is mostly made to theoretical considerations—investment calculations in durable equipment—and rarely to thorough empirical investigations.

We are indebted to Mr. N. Thygesen of the University of Copenhagen for helpful remarks and assistance with the planning of the statistical work. The computations have been run by Mr. Vestergaard, Regnecentralen.