winners and losers in housing markets this paper is a quantitatively oriented theoretical study into the interaction between housing prices aggregate production and household behaviour over a lifetime we develop a life cycle model of a production economy in which land and capital are used to build residential and commercial structures we find that in an economy where the share of land in the value of structures is large housing prices react more to an exogenous change in expected productivity or the world interest rate causing large redistribution effects between net buyers and net sellers of houses changing the financing constraint however has limited effects on housing prices

canadian city housing prices and urban market segmentation the authors provide a detailed empirical analysis of canadian city housing prices they examine the long run relationship between city house prices in canada from 1981 to 2005 as well as idiosyncratic relations between city prices and city specific variables

equilibrium and migration in dynamic models of housing markets abstract this paper presents a model of a regional housing market where households choose among competing employment opportunities offered by cities within a given system the equilibrium requirement imposed in the model requires that households be indifferent among all locations both within their current city and other cities within the region rather than in terms of exogenously determined utility or populations this construction allows the characterization of equilibrium in terms of potentially observable variables related to household income given that equilibrium can be defined in this more general manner it is natural to identify ways in which the predictions will differ from those generated by existing models capozza and helsley s j urban econ 28 1990 180 203 model of land conversion is evaluated in this context in this setting the option value associated with the ability to delay development depends directly on the degree to which the income processes are correlated across cities also increased idiosyncratic income risk does not necessarily lead to larger option values

the equilibrium effect of fundamentals on house prices and rents abstract using a dynamic equilibrium model of housing tenure choice with fully specified markets for homeownership and rental properties and endogenous house prices and rents this paper studies the effect of fundamentals on equilibrium house prices and rents lower interest rates relaxed lending standards and higher incomes are shown to account for approximately one half of the increase in the u s house price rent ratio between 1995 and 2006 and to generate the pattern of rapidly growing house prices sluggish rents increasing homeownership and rising household indebtedness observed in the data

valuing public goods the time to capitalization and network externalities a spatial hedonic regression analysis valuation studies of public goods such as a bike trail typically fail to consider the time to capitalization expanding upon previous hedonic housing models we show that the years since development of the good is an important factor in estimating its value using spatial analysis for housing in bloomington illinois we find the development of a bike trail has an initial negative impact on prices but over time the value of the trail turns positive suggesting network effects and information costs impact valuation estimates additional analysis finds that networked trail access has a greater impact than nonnetworked trail access

competitive search equilibrium in this paper i construct an equilibrium for markets with frictions which is competitive in the sense that all agents are price takers and maximize utility subject to a set of market parameters i show that the equilibrium allocation is socially optimal i also show how the competitive search equilibrium can be achieved if employers with vacancies can advertise publicly the wages they pay

policies to move from stabilization to growth although some discussions of stabilization see growth as more or less an assured product of appropriate stabilization this paper argues that there is no guarantee that stabilization will lead to growth it may result in stagnation the paper discusses the essentials of stabilization including inflation targets fiscal policy monetary policy exchange rates and incomes policy and suggests that two areas of structural reform deregulation including trade reform and reform of the financial sector can play a central role in the long run success of a stabilization effort the paper concludes that countries that have experienced protracted high inflation financial instability and payments crises probably will have a difficult and protracted transition to growth and that external resources will be necessary as a continuing feature of the transition sustained external support in the form of long term loans heavily conditioned on the tangibility and credibility of domestic progress in adjustment will help provide a bridge by which flight capital may return and foreign direct investment may be encouraged to take advantage of fresh opportunities

the impact of transaction costs and the expected length of stay on homeownership abstract economic theory suggests that an increase in the expected length of stay in a dwelling increases the probability of a household choosing to own a house rather than rent this hypothesis is derived from recognition that there are substantial transaction costs associated with homeownership and increased expected time in the home reduces the annualized transaction cost using a military data set we confirm that expected length of stay in a dwelling and the transaction costs of selling are very important to the ownership decision our best estimate of the transaction costs of selling a home are the sum of 3 of house value and 4 of household earnings

commitment and costly signaling in decentralized markets i propose a search model of a decentralized market with asymmetric information in which sellers are unable to commit to asking prices announced ex ante relaxing the commitment assumption prevents sellers from using price posting as a signaling device to direct buyers search private information about the gains from trade and inefficient entry on the demand side then contribute to market illiquidity endogenous sorting among costly marketing platforms can facilitate the search process by segmenting the market to alleviate information frictions seemingly irrelevant but incentive compatible listing fees are implementable provided that the market is not already sufficiently active abstract from author

urban decline and durable housing urban decline is not the mirror image of growth and durable housing is the primary reason the nature of decline is so different this paper presents a model of urban decline with durable housing and verifies these implications of the model 1 city growth rates are skewed so that cities grow more quickly than they decline 2 urban decline is highly persistent 3 positive shocks increase population more than they increase housing prices 4 negative shocks decrease housing prices more than they decrease population 5 if housing prices are below construction costs then the city declines and 6 the combination of cheap housing and weak labor demand attracts individuals with low levels of human capital to declining cities

the decision to move house and aggregate housing market dynamics using data on house sales and inventories this paper shows that housing market dynamics are driven mainly by listings and less so by transaction speed thus the decision to move house is key to understanding the housing market the paper builds a model where moving house is essentially an investment in match quality implying that moving depends on macroeconomic developments and housing market conditions the endogeneity of moving means there is a cleansing effect those at the bottom of the match quality distribution move first which generates overshooting in aggregate variables the model is applied to the 1995 2004 housingmarket boom

imperfect information and the house price in a general equilibrium model abstract house prices have inertia which may be because housing market participants need time to recognize long booms and recessions within a dynamic stochastic general equilibrium model with an endogenous market for housing i consider the case of rational expectations subject to imperfect information about the persistence of exogenous shocks i evaluate the performance of the model against the last 40 years of key u s macroeconomic data bayesian comparison strongly favors the model over the baseline case with perfect information under imperfect information agents rely on learning to form expectations which improves the ability of the model to generate realistic low frequency house price dynamics however as long as the agents form expectations rationally the improvement is limited furthermore to confine price inertia within the housing market is a challenge for the general equilibrium approach

the determinants of asymmetric volatility volatility in equity markets is asymmetric contemporaneous return and conditional return volatility are negatively correlated in this article i develop an asymmetric volatility model where dividend growth and dividend volatility are the two state variables of the economy the model allows both the leverage effect and the volatility feedback effect the two popular explanations of asymmetry the model is estimated by the simulated method of moments i find that both the leverage effect and volatility feedback are important determinants of asymmetric volatility and volatility feedback is significant both statistically and economically the relationship between stock price and its volatility has long interested financial researchers empirically returns and conditional variance of next period s returns are negatively correlated that is negative positive returns are generally associated with upward downward revisions of the conditional volatility this empirical phenomenon is often referred to as asymmetric volatility in the literature see engle and ng 1993 zakoian 1994 and wu and xiao 1999 the presence of asymmetric volatility is most apparent during stock market crashes when a large decline in stock price is associated with a significant increase in market volatility formal econometric models have been developed by researchers to capture asymmetric volatility for example asymmetric arch models of nelson 1991 and glosten jagannathan and runkle 1993 have been found to significantly outperform their counterparts that do not accommodate the asymmetry moreover continuous time stochastic volatility models generally produce estimates of a negative correlation between return and return volatility bakshi cao and chen 1997 and bates 1997 for a review of the literature on asymmetric volatility see bekaert

market imperfections and the instability of open economies in the presence of small market imperfections the transitional dynamics of an open economy can become indeterminate in that there exist an infinite number of equilibrium paths converging to a unique steady state in contrast to closed economy models in the open economy such indeterminacy can arise independently of the curvature of the utility function in consumption the results suggest that with market imperfections open economies can be subject to fluctuations caused by randomness unrelated to the economy s fundamentals

immigration and housing rents in american cities is there a local economic impact of immigration immigration pushes up rents and housing values in us destination cities the positive association of rent growth and immigrant inflows is pervasive in time series for all metropolitan areas i use instrumental variables based on a shift share of national levels of immigration into metropolitan areas an immigration inflow equal to 1 of a city s population is associated with increases in average rents and housing values of about 1 the results suggest an economic impact that is an order of magnitude bigger than that found in labor markets

mortgage debt consumption and illiquid housing markets in the great recession using a model with housing search endogenous credit constraints and mortgage default this paper accounts for the housing crash from 2006 to 2011 and its implications for aggregate and cross sectional consumption during the great recession left tail shocks to labor market uncertainty and tighter down payment requirements emerge as the key drivers an endogenous decline in housing liquidity amplifies the recession by increasing foreclosures contracting credit and depressing consumption balance sheets act as a transmission mechanism from housing to consumption that depends on gross portfolio positions and the leverage distribution low interest rate policies accelerate the recovery in housing and consumption

equilibrium models displaying endogenous fluctuations and chaos abstract this paper surveys current developments in dynamic general equilibrium theory concerned with conditions under which endogenous fluctuations are possible existing contributions are divided into two classes the larger one consists of models with a unique perfect foresight equilibrium while the second includes models where equilibrium is indeterminate and the set of equilibria involving endogenous fluctuations includes sunspots equilibria while the two classes of models involve oscillations of different natures and with different policy implications we show that both are consistent with optimizing behavior and competitive equilibrium

volatility persistence and stock valuations some empirical evidence using garch summary in this paper issues of volatility persistence and the changing risk premium in the stock market are investigated using the garch estimation technique we get a point estimate of the index of relative risk aversion of 4 5 and confirm the existence of changing equity premiums in the us during 1962 1985 the persistence of shocks to the stock return volatility is so high that the data cannot reject a non stationary volatility process specification the results of this paper are consistent with malkiel and pindyck s hypothesis that it is the unforseen rise ini the investment uncertainty during 1974 that causes the market to plunge

leverage and house price dynamics in u s cities we use city level data to analyze the relationship between homeowner borrowing patterns and house price dynamics our principal finding is that in cities where a greater fraction of homeowners are highly leveraged i e have high loan to value ratios house prices react more sensitively to city specific shocks such as changes in percapita income this finding is consistent with recent theories that emphasize the role of borrowing in shaping the behavior of asset prices

recursive factor of production interrelations and endogenous cycling a multivariate linear rational expectations equilibrium version of the lucas prescott investment model is developed to study the behavior of factors of productions with recursive interrelations the connection between these interrelations and endogenous cycling is established in a testable way maximum likelihood estimates using annual postwar aggregate u s manufacturing data provide strong evidence of capital labor interrelations that induce a labor overshooting type of endogenous cycling this raises questions for the methodology of current real business cycle models which rule out the possibility of such interrelations copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

depreciation of housing capital maintenance and house price inflation estimates from a repeat sales model abstract the rate at which physical capital depreciates is fundamental to investment in the economy nevertheless although housing capital accounts for one third of the total capital stock the rate at which housing capital depreciates has only rarely been directly estimated in part because prior studies do not control for maintenance for that same reason widely publicized measures of house price appreciation overstate the capital gain from homeownership using data from the american housing survey we examine these issues over the 1983 to 2001 period results indicate that gross of maintenance housing depreciates at roughly 2 5 percent per year while net of maintenance housing depreciates at approximately 2 percent per year moreover although the typical home appreciated at an annual real rate of roughly 0 75 percent after allowing for depreciation and maintenance the average homeowner experienced little capital gain

housing markets with endogenous search theory and implications abstract in this model buyers and sellers enter a housing market with imperfect elasticity buyers screen houses for sale in two segments of the market select a set of houses for search in each segment and then control their intensities of costly search among houses in their preferred sets their truncated distributions of acceptable match values are assumed to be power law partial equilibrium is calculated explicitly and steady state is characterized analytically the analysis is extended to multiple segments and markets empirical implications include higher average prices and price rent ratios in preferred segments and markets as well as spatial diffusion across segments and markets of average prices price rent ratios and search the predictions are consistent with existing empirical evidence

patterns of growth in chinese cities implications of the land lease abstract a special feature of china s housing market is land use rights in the form of land leasehold contracts granted by the government we consider an equilibrium model in which a representative developer may choose to redevelop existing centrally located housing or to develop new housing at the periphery of the city we show that as the city grows the land leasehold system results in the city center being developed less intensely and more land being used on the outskirts of the city when compared to a fee simple environment thus cities in china are likely to be relatively more spread out with city centers relatively older than would be the case with fee simple ownership our model suggests that excess residential land use is about 6 percent in addition compared with the ownership case housing supply will grow more quickly in the near future but more slowly later on during the transition of the chinese economy parallel to the supply growth pattern equilibrium price grows relative slowly in the near future but more quickly later on while we focus on residential uses we believe our model can be applied to other land uses

china s land market auctions evidence of corruption this paper studies the urban land market in china in 2003 2007 in china all urban land is owned by the state leasehold use rights for land for re development are sold by city governments and are a key source of city revenue leasehold sales are viewed as a major venue for corruption prompting a number of reforms over the years reforms now require all leasehold rights be sold at public auction there are two main types of auction regular english auction and an unusual type which we call a two stage auction the latter type of auction seems more subject to corruption and to side deals between potential bidders and the auctioneer absent corruption theory suggests that two stage auctions would most likely maximize sales revenue for properties which are likely to have relatively few bidders or are cold which would suggest negative selection on property unobservables into such auctions however if such auctions are more corruptible that could involve positive selection as city officials divert hotter properties to a more corruptible auction form the paper finds that overall sales prices are lower for two stage auctions and there is strong evidence of positive selection the price difference is explained primarily by the fact that two stage auctions typically have just one bidder or no competition despite the vibrant land market in chinese cities

house prices borrowing constraints and monetary policy in the business cycle i develop a general equilibrium model with sticky prices credit constraints nominal loans and asset prices changes in asset prices modify agents borrowing capacity through collateral value changes in nominal prices affect real repayments through debt deflation monetary policy shocks move asset and nominal prices in the same direction and are amplified and propagated over time the financial accelerator is not constant across shocks nominal debt stabilises supply shocks making the economy less volatile when the central bank controls the interest rate i discuss the role of equity debt indexation and household and firm leverage in the propagation mechanism finally i find that monetary policy should not target asset prices as a means of reducing output and inflation volatility

discount shock price rent dynamics and the business cycle the price rent ratio is highly volatile and predicts future returns for commercial real estate price rent variations in commercial real estate also tend to comove with investment and output we develop a general equilibrium model that explicitly introduces a rental market and incorporates collateral constraints on production as a key ingredient our estimation identifies discount rate shocks as the most important factor in 1 driving price rent variations 2 producing the long horizon predictability of real estate returns and 3 linking the dynamics in commercial real estate to those in the production sector

stability of equilibria with externalities it is shown that in a class of models with multiple externalities one positive and one negative all stationary equilibria may be locally stable to perturbations in the sense that there exist perfect foresight trajectories leading back to the equilibrium thus scale diseconomies arising for example out of a common resource pool generally overturn the liviatan samuelson result that equilibria are either saddlepoints or sources

search liquidity and the dynamics of house prices and construction the dynamics of house prices sales construction and population growth in response to city specific income shocks are characterized for 106 us cities a dynamic model of search in the housing market in which construction the entry of buyers house prices and sales are determined in equilibrium is then developed the theory generates dynamics qualitatively consistent with the observations and a version calibrated to match key features of the us housing market offers a substantial quantitative improvement over models without search in particular variation in the time it takes to sell induces transaction prices to exhibit serially correlated growth jel d83 r21 r23 r31 we explore the consequences of time consuming search and matching for the dynamics of house prices sales and construction at the city level first we char acterize the impact of city specific income shocks on the short run dynamics of average house prices home sales construction and population growth for a panel of us cities we then develop a model in which the entry of new buyers and the construction of new houses in response to such shocks are endogenously determined our theory generates serial correlation in the growth rates of house prices and construction even if income is strictly mean reverting following shocks 1 when calibrated to data on us cities our model accounts for over 80 percent of the variance of house price movements driven by city specific income shocks and nearly half of the observed autocorrelation of house price growth in our empirical analysis we estimate a structural panel vector autoregressive var model using city level observations on the variables listed above we focus

wages rents and the quality of life this study focuses on the role of wages and rents in allocating workers to locations with various quantities of amenities the theory demonstrates that if the amenity is also productive then the sign of the wage gradient is unclear while the rent gradient is positive the theory is extended to include the housing market and nontraded goods these extensions require little modification of the conclusion the empirical work on wages shows that the regional wage differences can be explained largely by these local attributes with the use of site price data implicit prices are estimated and quality of life rankings for the cities are computed

inefficient foreign borrowing a dual and common agency perspective studying the implications of uncoordinated borrowing the paper first looks at whether and when countries borrow too much in the aggregate it then revisits the original sin debate analyzing whether and when equity portfolio investment international portfolio diversification domestic currency denomination and longer maturities enhance borrowing countries access to international lending the paper thereby relates a country s level and quality of access to international capital markets to a variety of institutional features such as the level of domestic savings their location the extent of control rights held by political authorities and the interests of dominant domestic political forces

on endogenous competitive business cycles the belief that the long run equilibrium of a competitive monetary economy that does not experience any exogeneous shocks whether originating from the external environment or from policy should be modelled as a state that is stationary or perhaps growing at a constant rate seems to be deeply rooted in the mind of some economists

asset level risk and return in real estate investments relatively little is known in the academic literature about the idiosyncratic returns of individual real estate investments though quite a few commercial properties command prices commensurate with the market values of small to medium publicly traded companies i use purchase and sale data from the national council of real estate investment fiduciaries ncreif to compute holding period price appreciation returns for commercial properties in stark contrast with liquid asset returns idiosyncratic drift and volatility estimates diverge as the holding period shrinks this puzzling phenomenon survives a variety of controls for vintage effects systematic risk heterogeneity and sample selection biases i derive an equilibrium search based illiquid asset pricing model which when calibrated fits the data very well thus a structural model of illiquidity seems crucial to a descriptive theory of real estate investment returns the model can be extended to other illiquid asset classes and used to price derivatives such as debt claims

dynamic asset pricing in a system of local housing markets for most people buying a house is one of the most significant investment decisions of their lifetimes economists have mainly focused on the consumption aspects of this process for example a typical model in urban economics might frame the decision of where to live as a discrete choice over a bundle of housing and neighborhood attributes such as location square footage schooling options and crime levels the investment side of the problem has received considerably less atten tion a surprising omission since housing assets constitute approximately two thirds of the aver age american household s financial portfolio serve an important role in saving for retirement and as has become increasingly apparent can be quite risky this paper views housing markets from an asset pricing perspective using finance theory to relate the risk premium of a housing asset the difference between its expected return and the return for a risk free investment to its exposure to risk as usual in finance what matters for the risk premium of a housing asset is its exposure to systematic risk not idiosyncratic risk in our model there are two forms of systematic risk to which housing assets are exposed national risk which is common to houses everywhere and local risk which affects all houses within a given metropolitan area but nowhere else houses are said to be of the same type h if they are located in the same metropolitan area and have the same exposure to systematic risk our main conclusions are that 1 houses of every type face a common set of risk prices for the national risk and m for the local risk specific to

trade reform aggregate investment and capital flight on credibility and the value of information abstract in this paper we demonstrate that uncertainty about future policy reversals coupled with irreversible investment confers an option value to foreign exchange and may lead to capital flight and a fall in aggregate investment after a trade reform the analysis focuses on the value of information and the credibility of the policy reform the conclusion points to a potential role for international institutions to prevent such problems

homeownership in the 1980s and 1990s aggregate trends and racial gaps abstract housing policy under the clinton and bush administrations has sought to boost homeownership while also narrowing racial gaps in owner occupancy rates against that backdrop homeownership rose sharply in the 1990s but white minority gaps remain in excess of 25 percentage points we analyze these patterns using data from the 1983 to 2001 survey of consumer finances results indicate that household characteristics explain most of the increase in homeownership and roughly two thirds of the white minority homeownership gap credit barriers account for no more than 5 percentage points of the remaining gap this suggests that policy makers will need to look beyond innovations in mortgage finance if their goal is to further expand homeownership

labor income housing prices and homeownership abstract this paper tests the intuition that households whose incomes covary relatively strongly with housing prices should own relatively little housing among us households a one standard deviation in covariance between income and home prices is associated with a decrease of approximately 7500 in the value of owner occupied housing this result arises in the presence of controls for the level and distribution of home prices the generally positive correlations between income and home prices suggests that households enter financial markets with a greater exposure to risk than is typically modeled

the multivariate flexible accelerator model its empirical restrictions and an application to u s manufacturing this paper derives an exhaustive set of restrictions implied by the multistock flexible accelerator specification of the adjustment cost model for the firm the flexible accelerator specification of the demand for capital and labor is estimated using u s manufacturing annual data for the 1947 1976 period the consistency of the data with the model is examined by testing the validity of the derived restrictions finally the conditions which permit aggregation over firms are determined and tested empirically the flexible accelerator specification has been popular in the empirical literature on interrelated investment and employment decisions see nadiri and rosen 38 coen and hickman 10 and schramm 40 more recent examples include sargent 39 berndt fuss and wavermann 4 berndt and morrison 6 and meese 34 under suitable assumptions the specification may be rationalized by the adjustment cost model of the firm eisner and strotz 13 lucas 30 mortensen 35 extends the work of lucas and derives some empirically testable restrictions of the accelerator specification that are implied by the adjustment cost framework the broad objective of this paper is to provide a more rigorous and comprehensive test of the adjustment cost model than is presently found in the literature this objective is achieved in three stages first we offer an alternative derivation of the mortensen restrictions and more importantly we prove theorem 1 that his restrictions are exhaustive i e we establish an integrability result for the flexible accelerator adjustment cost model second the flexible accelerator specification of the demand for capital and labor is estimated using total u s manufacturing annual data for the 1947 76 period it is assumed that firms minimize expected production costs subject to a technology which implies that capital and labor stocks are costly to adjust while a third factor materials is freely adjustable the consistency of the data with the adjustmentcost framework is examined by testing for the validity of the derived restrictions further we test the validity of some separability restrictions on the adjustmentcost technology that to varying degrees are imposed a priori in all of the cited empirical studies finally we provide a complete characterization of the individual firm technologies which justify the common assumption of the existence of a representative firm this problem of aggregation over firms which has been

fiscal increasing returns hysteresis real wages and unemployment european unemployment is widely regarded as a problem of excessive real wages this view as it is usually expressed carries the disturbing implication that there is a sharp conflict between the interests of those currently employed and the unemployed because it suggests that increases in employment will require reductions in the real wages of those currently employed the first part of this paper shows that increases in employment in europe are likely to be associated with rising real take home pay for workers because of fiscal increasing returns increases in employment and output will make possible reductions in taxes sufficiently large to offset any effects of diminishing returns to labor the second part of the paper considers alternative explanations for the failure of nominal wages to adjust so as to restore full employment and their implications for the efficacy of fiscal policies it concludes that under a variety of plausible conditions tax cuts would succeed in stimulating employment this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

competitive equilibrium cycles recently there has been a surge of interest in endogenous business cycles that arise in competitive laissez faire economies in the context of standard overlapping generations economies conditions for the existence of equilibrium cycles have been given by grandmont 1983 and by benhabib and day 1982 models of the economy with extrinsic uncertainty or sunspots that have been developed by shell 1977 and by cass and shell 1983 see also balasko 1983 can also lead to equilibrium cycles

robotization and labour dislocation in the manufacturing sectors of oecd countries a panel var approach robots are the most important innovation which has affected the production process in the last three decades thanks to the latest advances in technology they have been able to perform an ever inc

house prices and fundamentals 355 years of evidence this paper examines the long run relation between prices and rents for houses in amsterdam from 1650 to 2005 we estimate the deviation of house prices from fundamentals and find that these deviations can be persistent and long lasting furthermore we look at the feedback mechanisms between housing market fundamentals and prices and find that market correction of the mispricing occurs mainly through prices not rents this correction back to equilibrium however can take decades

animal spirits investment and international capital movements abstract in the aftermath of the debt crisis developing countries are endeavoring to repatriate flight capital and to resume domestic private investment yet investment and the associated capital inflows continue to be disappointing and highly uneven over time in many cases this paper provides a model of investment and capital movements in and out of such countries central to the paper is the introduction of fiscal increasing returns to domestic capital into a standard dynamic optimizing model the resulting system may display multiple steady states and surprising dynamic behavior initial conditions and expectations both matter in selecting the equilibrium on which the economy converges for some initial conditions animal spirits can determine the course of investment and capital flows a limit cycle may occur around one of the welfare inferior equilibria along that cycle capital stocks and relative prices display endogenous fluctuations

transition to the property tax in china a dynamic general equilibrium analysis abstract we use the dynamic general equilibrium approach to examine the potential impacts of the introduction of alternative tax regimes in the housing market in china this approach models housing demand and supply based on the dynamic optimization behaviors of households and a representative housing developer the model is able to capture key features in the chinese housing market and it provides predictions about policy effects through counterfactual experiments we consider a universal property tax a selective tax that applies to investment properties only and a land value tax regarding the use of tax revenue we examine two alternatives 1 a redistributive scenario where tax revenue is redistributed in equal amounts to households and 2 a non redistributive scenario where tax revenue is spent on local public goods without affecting household decisions quantitatively we find that the selective and re distributive tax is more efficient in terms of generating sustainable government revenues and reducing vacancy rates

housing dynamics an urban approach abstract a dynamic linear rational equilibrium model in the tradition of alonso rosen and roback is consistent with many outstanding stylized facts of housing markets these include a that the markets are local in nature b that construction persistence is fully compatible with mean reversion in prices and c that price changes are predictable calibration exercises to match moments of the real data have notable successes and failures the volatility in local income processes as reflected in hmda mortgage applicant data can account for much of the observed price and construction volatility except for the most inelastically supplied local markets the model s biggest failure lies in its inability to match the strong persistence in high frequency price changes from year to year

housing price bubbles new supply and within city dynamics abstract although there is broad recognition that cities differ in their tendency to experience house price bubbles most studies assume away any possibility of within city heterogeneity in response to a bubble we develop a model that suggests that this assumption may be appropriate when markets are rising but can be far from reality on the bust side of a bubble during a housing boom new construction and related supply adjustments by developers ensure stable relative prices between low and high quality segments of the housing market on the bust side of a bubble however reduced housing starts allow demand side forces and mortgage default to create pressure for relative prices to diverge across market segments absent a change in technology as markets recover and new construction rebounds relative prices should revert back to pre crash levels evidence based on 2000 2013 single family home sales in phoenix arizona supports this modeling framework additional evidence also suggests that high rates of mortgage default contributed to divergence in relative prices when markets crashed

a generalized variance bounds test with an application to the holt et al inventory model abstract this paper derives a variance bounds test for a broad class of linear rational expectations equilibrium models according to this test if observed data accord with the model then a weighted sum of autocovariances of the covariance stationary components of the endogenous state variables should be nonnegative the new test reinterprets west s 1986 variance bounds test and extends its applicability by not excluding unobservable exogenous state variables nonstationary exogenous and endogenous state variables and nonzero initial values for the endogenous state variables the new test is computed together with west s test for the holt et al inventory model using nondurable industry data while west s test almost always rejects the model the latter almost always passes the new test this and other evidence provide strong support for the importance of supply shocks in explaining aggregate inventory behavior via the holt et al model

dynamic factor demands and the effects of energy price shocks a dynamic model is used to understand how sharp changes in energy prices affect investment behavior employment and energy use the authors discuss the theory behind their model selection model specifications estimation methods and data list parameter estimates and elasticities for the selected model and describe the simulations they conclude that 1 the data strongly reject the hypothesis of constant returns to scale within their specification of aggregate production 2 the data indicate adjustment costs on labor are small and 3 their results help reconcile some of the conflicting estimates of energy demand elasticities appearing in recent literature 23 references 3 figures 3 tables

testing for micro efficiency in the housing market using highly granular transaction level data for the norwegian housing market over the period 2002 2014 we investigate whether excessive prices persist or revert in repeat sales excessiveness in prices is detected by comparing selling prices to predicted prices implied by a hedonic model which includes a rich set of attributes persistence is rejected and there is substantial reversion in excessive prices our results also show little scope for profitable arbitrage by investing in apparently underpriced units we suggest that excessive prices are related to the stochastic arrival of interested purchasers at public showings which we show is nonrepeatable

why has house price dispersion gone up we calibrate a dynamic general equilibrium island model to investigate the 30 year increase in the level of house prices and their dispersion across u s metropolitan areas the model is based on two main assumptions households o w in and out metropolitan areas in response to local productivity shocks and the housing supply cannot adjust instantly because of technological and regulatory constraints the calibration reveals that the observed tightening of housing supply regulation cannot quantitatively account for the rise in the level and dispersion of house prices in equilibrium workers o w out of tightly regulated towards less regulated metropolitan areas undoing most of the price impact of local supply restrictions in contrast the observed increase in wage dispersion across metropolitan areas does create the observed increase in the level and dispersion of house prices workers o w towards exceptionally productive metropolitan areas and drive house prices up the calibration also suggests that the welfare eects of housing supply regulation are large when wages become more dispersed

the cyclical behavior of the beveridge curve in the housing market abstract this paper develops a business cycle model of the housing market with search frictions and entry of both buyers and sellers the housing market exhibits a well established cyclical component which features three stylized facts prices move in the same direction as sales and the number of houses for sale but opposite to the time it takes to sell a house these stylized facts imply that in the data housing vacancies and the number of buyers are positively correlated i e that the beveridge curve is upward sloping a baseline search and matching model of the housing market is unable to match these stylized facts because it inherently generates a downward sloping beveridge curve with free entry of both buyers and sellers our model reproduces the positive correlation between prices sales and vacancies and matches the stylized facts qualitatively and quantitatively

rational expectations business cycles in search equilibrium we examine the rational expectations equilibrium paths of the model of search and barter in diamond s aggregate demand management in search equilibrium for some initial positions there are two equilibrium paths converging to different steady states with the high activity path pareto dominating the low activity path with some parameters there is also a continuum of equilibrium paths converging to another steady state moreover there can be cycles that are equilibrium paths even though the environment is stationary

trading frictions and house price dynamics we model liquidity in housing markets the model provides a simple characterization for the joint process of prices sales and inventory we compare the implications of the model to certain properties of housing markets the model can generate the large price changes and the positive correlation between prices and sales that we see in the data unlike the data prices are negatively autocorrelated and high inventory predicts price appreciation we investigate several amendments to the model informational frictions show promise

energy consumption co2 emissions and economic growth an ethical dilemma in this study we examine the dynamic interrelationship in the output energy environment nexus by applying panel vector autoregression pvar and impulse response function analyses to data on energy consumption and its subcomponents carbon dioxide emissions and real gdp in 106 countries classified by different income groups over the period 1971 2011 our results reveal that the effects of the various types of energy consumption on economic growth and emissions are heterogeneous on the various groups of countries moreover causality between total economic growth and energy consumption is bidirectional thus making a case for the feedback hypothesis however we cannot report any statistically significant evidence that renewable energy consumption in particular is conducive to economic growth a fact that weakens the argument that renewable energy consumption is able to promote growth in a more efficient and environmentally sustainable way finally in analysing the case for an inverted u shaped ekc we find that the continued process of growth aggravates the greenhouse gas emissions phenomenon in this regard we cannot provide any evidence that developed countries may actually grow out of environmental pollution in the light of these findings the efficacy of recent government policies in various countries to promote renewable energy consumption as a means for sustainable growth is questioned put differently there seems to be an ethical dilemma between high economic growth rates and unsustainable environment and low or zero economic growth and environmental sustainability

hedging house price risk in the presence of lumpy transaction costs abstract this paper presents a life cycle model of housing demand with uncertain house prices and lumpy transaction costs the paper extends the s s methodology to a non stationary discrete time framework with multivariate stochastic price processes this allows the characterization of a self hedging mechanism in an incomplete housing market households use earlier accumulated housing wealth to hedge against future housing cost risk as a result the direction of the effect of price uncertainty on housing demand depends critically on households future housing consumption plans when price uncertainty increases households consume and thereby invest in less housing if they plan to realize the housing wealth gain however they will instead take a larger housing position if they plan to move to a bigger home in a correlated housing market in the future

search liquidity and the dynamics of house prices and construction corrigendum in the course of our ongoing research we have discovered two substantive errors in this article these mistakes do not affect significantly either the qualitative nature of the results or any of the principal conclusions stated in the paper they do however affect the specific quantitative results one error affects the empirical findings presented primarily in section i and the online appendix the other involves the calculation of sales of existing houses in artificial data generated by the model this affects both the calibration section iv and the equilibrium dynamics in section v principally with regard to the dynamics of sales the article s quantitative results are presented through tables of statistics and figures depicting impulse responses virtually all of the specific numerical values in these tables and figures are affected most only trivially but some significantly in this corrigendum we describe the two errors and present corrected values and new versions for the statistics and figures most affected we number the tables and figures as in the original article and the revised online appendix updated correct programs have replaced those containing the mistakes on the aer s website and the revised online appendix contains a complete set of corrected tables and figures

non temporal components of residential real estate appreciation this paper separates the components of capital appreciation returns in an asset market into fixed and stochastic portions it proposes a control for the problem of fixed components in the capital appreciation return used in transactions based return estimates we find a consistent bias in the index resulting from repeat sales regressions which may be eliminated through simple methods the sign and magnitude of the bias as well as its systematic variation across property suggest that it is caused by incremental home improvements as well as by price risk we propose a maximum likelihood method for estimating the first and second moments of the fixed and temporal components of real estate returns that relies upon relatively small samples copyright 1995 by mit press

the effects of price risk on housing demand empirical evidence from u s markets this article examines how price risk affects housing demand it identifies two relevant channels a financial risk effect that reduces demand and a hedging effect that increases demand since current homes may hedge future housing costs the latter dominates when hedging incentives are strong namely when the likelihood of moving up the housing ladder is high and the tendency to move across markets is low for households with weak hedging incentives the article finds negative effects of price risk on the timing and size of home purchases but positive effects for households with strong hedging incentives

housing price and fundamentals in a transition economy the case of the beijing market this article develops a dynamic rational expectations general equilibrium framework that links house value to fundamental economic variables such as income growth demographics migration and land supply our framework handles nonstationary dynamics as well as structural changes in fundamentals that are commonplace in transition economies applying the framework to beijing we find that the equilibrium house price and rent under reasonable parameterizations of the model are substantially lower than the data we explore potential explanations for the discrepancies between the model and the data

understanding the puzzling risk return relationship for housing standard theory predicts a positive relationship between risk and return yet recent data show that housing returns vary positively with risk in some markets but negatively in others this paper rationalizes these cross market differences in the risk return relationship for housing and in so doing explains the puzzling negative relationship the paper shows that when the current house provides a hedge against the risk associated with the future housing consumption households are willing to accept a lower return to compensate for risk thus weakening the positive risk return relationship further in markets with less elastic housing supply and a growing population hedging incentives can be sufficiently strong to make the relationship negative the empirical analysis confirms these predictions suggesting that hedging incentives housing supply and urban growth are indeed central to understanding the risk return relationship for housing the author 2013 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oup com oxford university press

credibility and stabilization the paper deals with stabilization as a one shot problem to ask what credibility means in a world where programs will succeed with probability one a model is spelled out where the equilibrium program has some ex ante probability of failure the model draws attention to the factors that raise or lower the probability of success of a stabilization program and thus offers a positive theory of stabilization reputation that emerges as a central element in repeated games has no role in this model

a more timely house price index using listings data we construct a new repeat sales house price index that describes house values at the contract date when the price is determined rather than the closing date when the property is transferred we showthat this difference in timing helps explain several puzzles about house prices including their strong short term serial correlation and their weak correlation with stock prices and macroeconomic news shocks in addition we showthat a variant of our index that relies exclusively on listings data for recent transactions accurately reveals trends in house prices several months before existing price indexes like case shiller become available