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Demand shocks and price stickiness in housing market dynamics

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  • Fan, Ying

Abstract

The current study establishes a dynamic stochastic general equilibrium model with sticky housing prices and compares the heterogeneous macro effects of exogenous uncertainty shocks on housing market dynamics in China. Based on Bayesian estimation, the findings indicate that 1) intertemporal/intratemporal preference and liquidity constraint shocks significantly affect housing market dynamics through different channels; 2) macro effects of demand shocks exhibit frequency-domain dependence, thereby suggesting the crucial role of stickiness; and 3) housing price stickiness significantly exacerbates fluctuation and postpones the convergence of housing markets under demand shocks, particularly in the post-crisis period; additionally, it asserts an asymmetric effect in booming and cooling markets. Furthermore, the counterfactual analysis provides policy suggestions to correct the housing market dynamics associated with demand shocks and price stickiness.

Suggested Citation

  • Fan, Ying, 2022. "Demand shocks and price stickiness in housing market dynamics," Economic Modelling, Elsevier, vol. 110(C).
    • Handle: RePEc:eee:ecmode:v:110:y:2022:i:c:s0264999322000669
    DOI: 10.1016/j.econmod.2022.105820
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    Cited by:

    1. Sun, Yu & Gong, Hui, 2023. "Firm financialization and cost stickness behavior," Finance Research Letters, Elsevier, vol. 57(C).
    2. Fan, Ying, 2023. "Collaborative integration, workplace flexibility and scholarly productivity: Evidence from the COVID-19 outbreak," The Quarterly Review of Economics and Finance, Elsevier, vol. 87(C), pages 1-15.

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    More about this item

    Keywords

    Demand shock; Sticky housing price; Frequency dependence; China;
    All these keywords.

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets

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