Full Citation

Title: Heterogeneous beliefs and housing-market boom-bust cycles

Citation Type: Journal Article

Publication Year: 2013

ISBN:

ISSN:

DOI: 10.1016/J.JEDC.2012.11.002

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Abstract: This paper presents a business cycle model capturing the stylized features of housing-market boom-bust cycles in developed countries. The model implies that over-optimism of mortgage borrowers generates housing-market boom-bust cycles, if mortgage borrowers are credit-constrained and savers do not share their optimism. This result holds without price stickiness. If price stickiness is introduced into the model, then the model replicates a low policy interest rate during a housing boom as an endogenous reaction to a low inflation rate, given a Taylor rule. Thus, monetary easing observed during housing booms are consistent with the presence of over-optimism causing boom-bust cycles.

Url: https://www.sciencedirect.com/science/article/pii/S0165188912002163

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Authors: Tomura, Hajime

Periodical (Full): Journal of Economic Dynamics and Control

Issue: 4

Volume: 37

Pages: 735-755

Data Collections: IPUMS CPS

Topics: Housing and Segregation

Countries: