The Unassuming Economist

A new IMF working paper finds that a country’s geography, demographics, and economic conditions (e.g. income level, credit conditions, and stock market performance) are the driving forces behind the changes in construction shares. The results of the paper show that “During the boom, many countries overshoot the norm. After the crisis, the process has reversed and many countries have undershoot the norm. But for some countries, the adjustment has fallen short of the model’s predictions.” So, “when economic conditions normalize over the medium term, Greece, Iceland, and Ireland in advanced Europe, and Latvia, Lithuania, Hungary, and Ukraine in emerging Europe may see a recovery in their construction shares. But construction shares could decline further in Spain, the United Kingdom, Romania, and the Slovak Republic.”