Housing, portfolio choice, and the macroeconomy
AbstractMuch of the macroeconomics literature dealing with wealth distribution has become abstracted from modeling housing explicitly. This paper investigates the properties of the wealth distribution and the portfolio composition regarding housing and equity holdings and their relationship to macroeconomic shocks. To this end, I construct a business cycle model in which agents differ in age, income, and wealth and derive utility from housing services. The model is consistent with several facts such as the life-cycle pattern of housing-to-wealth ratios, the larger degree of concentration for nonhousing wealth, and the smaller weight of housing in richer households’ portfolios as well as the larger housing-to-wealth ratios in recessions. In addition, the model delivers the familiar business-cycle moments regarding relative standard deviations and procyclicality of consumption, investment, and employment.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 2005-21.
Date of creation: 2005
Date of revision:
Other versions of this item:
- NEP-ALL-2005-09-29 (All new papers)
- NEP-DGE-2005-09-29 (Dynamic General Equilibrium)
- NEP-MAC-2005-09-29 (Macroeconomics)
- NEP-URE-2005-09-29 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Per Krusell & Anthony A. Smith, Jr., .
"Income and Wealth Heterogeneity, Portfolio Choice, and Equilibrium Asset Returns,"
GSIA Working Papers
1997-45, Carnegie Mellon University, Tepper School of Business.
- Krusell, Per & Smith, Anthony A., 1997. "Income And Wealth Heterogeneity, Portfolio Choice, And Equilibrium Asset Returns," Macroeconomic Dynamics, Cambridge University Press, vol. 1(02), pages 387-422, June.
- Ana M. Aizcorbe & Arthur B. Kennickell & Kevin B. Moore, 2003. "Recent changes in U.S. family finances: evidence from the 1998 and 2001 Survey of Consumer Finances," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jan, pages 1-32.
- Mark Huggett & Gustavo Ventura, 1999.
"On the Distributional Effects of Social Security Reform,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 2(3), pages 498-531, July.
- Mark Huggett & Gustavo Ventura, 1998. "On the Distributional Effects of Social Security Reform," Working Papers 9801, Centro de Investigacion Economica, ITAM.
- Hugett, M. & Ventura, G., 1997. "On the Distributional Effects of Social Security Reform," UWO Department of Economics Working Papers 9710, University of Western Ontario, Department of Economics.
- Edward C. Prescott, 1986.
"Theory ahead of business cycle measurement,"
Federal Reserve Bank of Minneapolis, issue Fall, pages 9-22.
- Prescott, Edward C., 1986. "Theory ahead of business-cycle measurement," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 25(1), pages 11-44, January.
- Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
- Joao F. Cocco, 2005. "Portfolio Choice in the Presence of Housing," Review of Financial Studies, Society for Financial Studies, vol. 18(2), pages 535-567.
- Cooley, T.F. & Ohanian, L.E., 1989.
"The Cyclical Behavior Of Prices,"
RCER Working Papers
188, University of Rochester - Center for Economic Research (RCER).
- Aiyagari, S Rao, 1994.
"Uninsured Idiosyncratic Risk and Aggregate Saving,"
The Quarterly Journal of Economics,
MIT Press, vol. 109(3), pages 659-84, August.
- Krusell, P & Smith Jr, A-A, 1995.
"Income and Wealth Heterogeneity in the Macroeconomic,"
RCER Working Papers
399, University of Rochester - Center for Economic Research (RCER).
- Per Krusell & Anthony A. Smith & Jr., 1998. "Income and Wealth Heterogeneity in the Macroeconomy," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 867-896, October.
- Per Krusell & Anthony A. Smith, Jr., . "Income and Wealth Heterogeneity in the Macroeconomy," GSIA Working Papers 1997-37, Carnegie Mellon University, Tepper School of Business.
- David K. Backus & Patrick J. Kehoe, 1991.
"International evidence on the historical properties of business cycles,"
145, Federal Reserve Bank of Minneapolis.
- Backus, David K & Kehoe, Patrick J, 1992. "International Evidence of the Historical Properties of Business Cycles," American Economic Review, American Economic Association, vol. 82(4), pages 864-88, September.
- David K. Backus & Patrick J. Kehoe, 1992. "International Evidence on the Historical Properties of Business Cycles," Working Papers 92-5, New York University, Leonard N. Stern School of Business, Department of Economics.
- Huggett, Mark, 1996. "Wealth distribution in life-cycle economies," Journal of Monetary Economics, Elsevier, vol. 38(3), pages 469-494, December.
- Den Haan, Wouter J & Marcet, Albert, 1994.
"Accuracy in Simulations,"
Review of Economic Studies,
Wiley Blackwell, vol. 61(1), pages 3-17, January.
- Rios-Rull, Jose-Victor, 1996. "Life-Cycle Economies and Aggregate Fluctuations," Review of Economic Studies, Wiley Blackwell, vol. 63(3), pages 465-89, July.
- Antonia Díaz & María José Luengo-Prado, 2010.
"The Wealth Distribution With Durable Goods,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(1), pages 143-170, 02.
- Pedro Silos, 2005.
"Housing tenure and wealth distribution in life-cycle economies,"
2005-25, Federal Reserve Bank of Atlanta.
- Silos Pedro, 2007. "Housing Tenure and Wealth Distribution in Life Cycle Economies," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-24, August.
- Pierre-Olivier Gourinchas, 2000. "Precautionary Savings, LifeCycle and Macroeconomics," Econometric Society World Congress 2000 Contributed Papers 0793, Econometric Society.
- Silos, Pedro, 2006. "Assessing Markov chain approximations: A minimal econometric approach," Journal of Economic Dynamics and Control, Elsevier, vol. 30(6), pages 1063-1079, June.
- Joseph Gruber & Robert Martin, 2003. "Precautionary savings and the wealth distribution with illiquid durables," International Finance Discussion Papers 773, Board of Governors of the Federal Reserve System (U.S.).
- Fernández-Villaverde, Jesús & Krueger, Dirk, 2011.
"Consumption And Saving Over The Life Cycle: How Important Are Consumer Durables?,"
Cambridge University Press, vol. 15(05), pages 725-770, November.
- Jesus Fernandez-Villaverde & Dirk Krueger, 2004. "Consumption and Saving over the Life Cycle: How Important are Consumer Durables?," 2004 Meeting Papers 357b, Society for Economic Dynamics.
- Kjetil Storesletten & Chris I. Telmer & Amir Yaron, 2004. "Cyclical Dynamics in Idiosyncratic Labor Market Risk," Journal of Political Economy, University of Chicago Press, vol. 112(3), pages 695-717, June.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Meredith Rector).
If references are entirely missing, you can add them using this form.