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Rental market and macroeconomics: evidence for the US

Rental market and macroeconomics: evidence for the US The aim of this paper is to assess whether the inclusion of the rental housing market affect the dynamics of the real business cycles (RBCs).Design/methodology/approachFor this investigation, the authors model and estimate two dynamic stochastic general equilibrium (DSGE) versions for the US economy, one with and one without the presence of residential rent.FindingsThe findings provide evidence that the inclusion of the rental housing market can improve the assessment of public policies and the projection of scenarios in the face of sudden macroeconomic shocks. The addition of this secondary housing market augments the effect of total factor productivity (TFP) shock on output and consumption. In addition, it increases the effect of the credit shock on the demand for housing. The latter highlights the role of credit for the real estate market. Therefore, the authors recommend that analysts and macro-prudential authorities consider adding it to their models.Originality/valueThe findings provide evidence that the inclusion of the rental housing market can improve the assessment of public policies and the projection of scenarios in the face of sudden macroeconomic shocks. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Economic Studies Emerald Publishing

Rental market and macroeconomics: evidence for the US

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0144-3585
DOI
10.1108/jes-01-2020-0003
Publisher site
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Abstract

The aim of this paper is to assess whether the inclusion of the rental housing market affect the dynamics of the real business cycles (RBCs).Design/methodology/approachFor this investigation, the authors model and estimate two dynamic stochastic general equilibrium (DSGE) versions for the US economy, one with and one without the presence of residential rent.FindingsThe findings provide evidence that the inclusion of the rental housing market can improve the assessment of public policies and the projection of scenarios in the face of sudden macroeconomic shocks. The addition of this secondary housing market augments the effect of total factor productivity (TFP) shock on output and consumption. In addition, it increases the effect of the credit shock on the demand for housing. The latter highlights the role of credit for the real estate market. Therefore, the authors recommend that analysts and macro-prudential authorities consider adding it to their models.Originality/valueThe findings provide evidence that the inclusion of the rental housing market can improve the assessment of public policies and the projection of scenarios in the face of sudden macroeconomic shocks.

Journal

Journal of Economic Studies – Emerald Publishing

Published: Apr 9, 2021

Keywords: Real estate market; Rental housing market; Real business cycle; DSGE

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