Why the Housing Sector Leads the Whole Economy: The Importance of Collateral Constraints and News Shocks

Why the Housing Sector Leads the Whole Economy: The Importance of Collateral Constraints and News... This paper establishes a dynamic stochastic partial equilibrium model for explaining residential investment dynamics in the United States, focusing on the distinctive cyclical features of residential investment in that it leads the whole economy. This paper is different from the existing literature by adding three new features to the model: news shocks, collateral constraints and agent heterogeneity. The partial equilibrium analysis where interest rates are exogenously fixed shows that these assumptions are essential to generating the dynamic pattern in which residential investment leads consumption and GDP. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Real Estate Finance and Economics Springer Journals

Why the Housing Sector Leads the Whole Economy: The Importance of Collateral Constraints and News Shocks

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Publisher
Springer US
Copyright
Copyright © 2012 by Springer Science+Business Media, LLC
Subject
Economics / Management Science; Regional/Spatial Science; Finance/Investment/Banking
ISSN
0895-5638
eISSN
1573-045X
D.O.I.
10.1007/s11146-012-9389-5
Publisher site
See Article on Publisher Site

Abstract

This paper establishes a dynamic stochastic partial equilibrium model for explaining residential investment dynamics in the United States, focusing on the distinctive cyclical features of residential investment in that it leads the whole economy. This paper is different from the existing literature by adding three new features to the model: news shocks, collateral constraints and agent heterogeneity. The partial equilibrium analysis where interest rates are exogenously fixed shows that these assumptions are essential to generating the dynamic pattern in which residential investment leads consumption and GDP.

Journal

The Journal of Real Estate Finance and EconomicsSpringer Journals

Published: Sep 14, 2012

References

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