IDEAS home Printed from https://ideas.repec.org/p/nst/samfok/12712.html
   My bibliography  Save this paper

A DSGE Model with Housing in the Cointegrated VAR Framework

Author

Listed:
  • Bjørnar Karlsen Kivedal

    (Department of Economics, Norwegian University of Science and Technology)

Abstract

In order to empirically investigate the assumptions underlying a theoretical dynamic stochastic general equilibrium (DSGE) model, the long-run and the short-run structure of the model may be imposed in the framework given by a cointegrated vector autoregression (CVAR) model. By following the method outlined in Juselius and Franchi (2007), I use the CVAR model to investigate the restrictions underlying the DSGE model in Iacoviello (2005), which is a monetary business cycle model that includes housing in order to include e ects from the nancial accelerator. This yields a common trends representation of the data subject to the theoretical constraints of the DSGE model which can be used to calculate the impulse responses for different shocks. These impulse responses are then compared to the impulse responses presented in Iacoviello (2005). The main finding is that the results given by the estimated CVAR model do not correspond well to the restrictions of the DSGE model. This is shown both by testing the cointegrating relationships implied by the long-run relations, and the response to shocks in the period for which the model is estimated. Imposing theoretical restrictions pertaining to the DSGE model in Iacoviello (2005) on his estimated VAR model yields different impulse responses from various shocks which change some of the main findings of the model. Particularly, imposing long-run homogeneity between housing prices and output and imposing the Fisher relationship which is assumed in the theoretical model seems to yield results which are opposite of what the financial accelerator, which is one of the key motivations behind the model in Iacoviello (2005), suggests. The non-stationarity of inflation and the nominal interest rate may be important reasons for this, together with the non-acceptance of the imposed long-run hypotheses.

Suggested Citation

  • Bjørnar Karlsen Kivedal, 2012. "A DSGE Model with Housing in the Cointegrated VAR Framework," Working Paper Series 12712, Department of Economics, Norwegian University of Science and Technology.
    • Handle: RePEc:nst:samfok:12712
    as

    Download full text from publisher

    File URL: http://www.svt.ntnu.no/iso/WP/2012/4_cvar_iacoviello_BKK.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kiyotaki, Nobuhiro & Moore, John, 1997. "Credit Cycles," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 211-248, April.
    2. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393, Elsevier.
    3. Johansen, Søren, 2000. "A Bartlett Correction Factor For Tests On The Cointegrating Relations," Econometric Theory, Cambridge University Press, vol. 16(5), pages 740-778, October.
    4. Lütkepohl,Helmut & Krätzig,Markus (ed.), 2004. "Applied Time Series Econometrics," Cambridge Books, Cambridge University Press, number 9780521547871.
    5. Ireland, Peter N., 2004. "A method for taking models to the data," Journal of Economic Dynamics and Control, Elsevier, vol. 28(6), pages 1205-1226, March.
    6. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    7. Matteo Iacoviello, 2005. "House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle," American Economic Review, American Economic Association, vol. 95(3), pages 739-764, June.
    8. Johansen, Soren, 2002. "A small sample correction for tests of hypotheses on the cointegrating vectors," Journal of Econometrics, Elsevier, vol. 111(2), pages 195-221, December.
    9. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    10. Juselius, Katarina, 2006. "The Cointegrated VAR Model: Methodology and Applications," OUP Catalogue, Oxford University Press, number 9780199285679.
    11. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
    12. Johansen, Soren, 1995. "Likelihood-Based Inference in Cointegrated Vector Autoregressive Models," OUP Catalogue, Oxford University Press, number 9780198774501.
    13. David N. DeJong & Chetan Dave, 2007. "Introduction to Structural Macroeconometrics," Introductory Chapters, in: Structural Macroeconometrics, Princeton University Press.
    14. Lütkepohl,Helmut & Krätzig,Markus (ed.), 2004. "Applied Time Series Econometrics," Cambridge Books, Cambridge University Press, number 9780521839198.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gričar Sergej & Baldigara Tea, 2019. "An explorative study of tourism time series: Evidence from Slovenia and Croatia," Croatian Review of Economic, Business and Social Statistics, Sciendo, vol. 5(2), pages 101-116, December.
    2. Sergej Gričar & Štefan Bojnec, 2021. "Technical Analysis of Tourism Price Process in the Eurozone," JRFM, MDPI, vol. 14(11), pages 1-25, October.
    3. Michal Rubaszek & Margarita Rubio, 2020. "Does the rental housing market stabilize the economy? A micro and macro perspective," Empirical Economics, Springer, vol. 59(1), pages 233-257, July.
    4. Mustafa Ozan Yıldırım & Mehmet İvrendi, 2021. "Turkish Housing Market Dynamics: An Estimated DSGE Model," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 15(2), pages 238-267, May.
    5. Bjørnar Karlsen Kivedal, 2018. "A new Keynesian framework and wage and price dynamics in the USA," Empirical Economics, Springer, vol. 55(3), pages 1271-1289, November.
    6. Francisco Camões & Sofia Vale, 2020. "I feel wealthy: A major determinant of Portuguese households’ indebtedness?," Empirical Economics, Springer, vol. 58(4), pages 1953-1978, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Grau, Aaron Stephan Alexander & Hockmann, Heinrich, 2017. "Estimating oligopsony power on two vertically integrated markets," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 261277, European Association of Agricultural Economists.
    2. Efimova, Olga & Serletis, Apostolos, 2014. "Energy markets volatility modelling using GARCH," Energy Economics, Elsevier, vol. 43(C), pages 264-273.
    3. Elżbieta Szaruga & Elżbieta Załoga, 2022. "Environmental Management from the Point of View of the Energy Intensity of Road Freight Transport and Shocks," IJERPH, MDPI, vol. 19(21), pages 1-22, November.
    4. Jesser PALADINES, 2017. "Oil Price and Real GDP Growth of Ecuador: A Vector Autoregressive Approach," Journal of Economics and Political Economy, KSP Journals, vol. 4(1), pages 71-78, March.
    5. Fahmida Khatun & Syed Yusuf Saadat & Md. Kamruzzaman, 2019. "FINANCE FOR SDGs: Addressing Governance Challenge of Aid Utilisation in Bangladesh," CPD Working Paper 125, Centre for Policy Dialogue (CPD).
    6. Kerry Patterson & Michael A. Thornton, 2013. "A review of econometric concepts and methods for empirical macroeconomics," Chapters, in: Nigar Hashimzade & Michael A. Thornton (ed.), Handbook of Research Methods and Applications in Empirical Macroeconomics, chapter 2, pages 4-42, Edward Elgar Publishing.
    7. Glauben, Thomas & Loy, Jens-Peter & Körner, Julia, 2007. "Der Einfluss der Euro-Einführung auf die Preisentwicklung bei frischen Lebensmitteln in Deutschland," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 127(3), pages 457-485.
    8. MacLachlan, Matthew J. & Boussios, David, 2018. "Identifying the price determinants of animal products in the presence of structural breaks," 2018 Annual Meeting, August 5-7, Washington, D.C. 273974, Agricultural and Applied Economics Association.
    9. James Alm & Abel Embaye, 2010. "Explaining The Growth Of Government Spending In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 78(2), pages 152-169, June.
    10. Gerlach, Stefan & Peng, Wensheng, 2005. "Bank lending and property prices in Hong Kong," Journal of Banking & Finance, Elsevier, vol. 29(2), pages 461-481, February.
    11. Rita D'Ecclesia & Mauro Costantini, 2006. "Comovements and correlations in international stock markets," The European Journal of Finance, Taylor & Francis Journals, vol. 12(6-7), pages 567-582.
    12. Pretis, Felix, 2020. "Econometric modelling of climate systems: The equivalence of energy balance models and cointegrated vector autoregressions," Journal of Econometrics, Elsevier, vol. 214(1), pages 256-273.
    13. Kaminski, Jermain & Hopp, Christian & Tykvová, Tereza, 2019. "New technology assessment in entrepreneurial financing – Does crowdfunding predict venture capital investments?," Technological Forecasting and Social Change, Elsevier, vol. 139(C), pages 287-302.
    14. Algieri, Bernardina, 2013. "A Roller Coaster Ride: an empirical investigation of the main drivers of wheat price," Discussion Papers 145556, University of Bonn, Center for Development Research (ZEF).
    15. Fahmida Khatun & Syed Yusuf Saadat, 2022. "The Optimum Level of Income Inequality in South Asia: An Econometric Analysis," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 23(1), pages 7-29, March.
    16. Krogscheepers, Corris & Gossel, Sean Joss, 2015. "Input cost and international demand effects on the production of platinum group metals in South Africa," Resources Policy, Elsevier, vol. 45(C), pages 193-201.
    17. Søren Johansen, 2014. "Times Series: Cointegration," Discussion Papers 14-24, University of Copenhagen. Department of Economics.
    18. David B. Stephenson & Alemtsehai A. Turasie & Donald P. Cummins, 2023. "More Accurate Climate Trend Attribution by Using Cointegrating Vector Time Series Models," Sustainability, MDPI, vol. 15(16), pages 1-18, August.
    19. André K. Anundsen & Eilev S. Jansen, 2013. "Self-reinforcing effects between housing prices and credit: an extended version," Discussion Papers 756, Statistics Norway, Research Department.
    20. Pedro M. G. Martins, 2010. "Fiscal Dynamics in Ethiopia: The Cointegrated VAR Model with Quarterly Data," Working Paper Series 0910, Department of Economics, University of Sussex Business School.

    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nst:samfok:12712. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Anne Larsen (email available below). General contact details of provider: https://edirc.repec.org/data/isontno.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.