Kitchen, John (2008): Some information on the relative valuations of residential and other private assets using Bureau of Economic Analysis fixed assets data.
Download (166kB) | Preview
This paper presents information on the relative valuation of fixed assets, using data from the Bureau of Economic Analysis (BEA) coupled with observed longer-run historical relationships and “stylized facts” for macroeconomic relationships in the U.S. economy. Alternative scenarios are examined describing the likely extent of overvaluation of residential assets and the combination of real investment and price changes that would be required to resolve the overvaluation under varying assumptions. The scenarios presented illustrate how changes to the total nominal valuation of the asset stock typically are more easily accomplished through changes to the price of the asset than from changes in real investment flows, and this is particularly true for residential assets with their low depreciation rate. The approach provides a useful framework for the evaluation of alternative future paths and the scenarios presented provide useful benchmarks against which alternative combinations of changes in real investment and prices can be compared.
|Item Type:||MPRA Paper|
|Original Title:||Some information on the relative valuations of residential and other private assets using Bureau of Economic Analysis fixed assets data|
|Keywords:||residential investment; asset valuation; housing price;|
|Subjects:||E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E30 - General
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity
|Depositing User:||John Kitchen|
|Date Deposited:||25. Jan 2011 17:56|
|Last Modified:||18. Feb 2013 19:21|
Bureau of Economic Analysis, U.S. Department of Commerce, “Fixed Assets and Consumer Durable Goods in the United States, 1925–99,” September, 2003.
Blue Chip Economic Indicators, Aspen Publishers, January 2008.
Congressional Budget Office, “CBO Testimony: The Current Economic Situation,” Statement of Peter R. Orszag, Director, before the Committee on the Budget, U.S. House of Representatives, December 5, 2007.
Davis, Morris A. and Jonathan Heathcote, “The Price and Quantity of Residential Land in the United States,” manuscript, November, 2006.
Gallin, Joshua, “The Long-Run Relationship between House Prices and Rents,” Federal Reserve Board of Governors, Finance and Economics Discussion Series, 2004-50, September 2004.
Himmelberg, Charles, Christopher Mayer, and Todd Sinai, “Assessing High House Prices: Bubbles, Fundamentals, and Misperceptions,” Federal Reserve Bank of New York Staff Report no. 218, September 2005.
Kaldor, Nicholas, “Capital Accumulation and Economic Growth,” in F.A. Lutz and D.C. Hague (eds.), The Theory of Capital, St. Martin’s Press, 1961, pp. 177-222.
Poterba, James, "Tax Subsidies to Owner-Occupied Housing: An Asset Market Approach." Quarterly Journal of Economics, November 1984, pp. 729-752.
Romer, Paul M., “Capital Accumulation and Long-Run Growth,” in Robert J. Barro (ed.), Modern Business Cycle Theory, Harvard University Press, 1989, pp. 51-127.