Mendicino, Caterina and Lambertini, Luisa and Punzi, Maria Teresa (2010): Expectations-Driven Cycles in the Housing Market.
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This paper analyzes housing market boom-bust cycles driven by changes in households'expectations. We explore the role of expectations not only on productivity but on several other shocks that originate in the housing market, the credit market and the conduct of monetary policy. We find that, in the presence of nominal rigidities, expectations on both the conduct of monetary policy and future productivity can generate housing market boom-bust cycles in accordance with the empirical findings. Moreover, expectations of either a future reduction in the policy rate or a temporary increase in the central bank's inflation target that are not fulfilled generate a macroeconomic recession. Increased access to credit generates a boom-bust cycle in most variables only if it is expected to be reversed in the near future.
|Item Type:||MPRA Paper|
|Original Title:||Expectations-Driven Cycles in the Housing Market|
|Keywords:||Credit Frictions, Boom-Bust Cycles, News Shocks, Housing Prices.|
|Subjects:||E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations ; Cycles
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy
|Depositing User:||caterina mendicino|
|Date Deposited:||18. Feb 2010 17:33|
|Last Modified:||12. Feb 2013 22:18|
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