Productivity shocks and housing market inflations in new Keynesian models
AbstractEconometric evidence suggests the existence of two dynamics in the postwar U.S. housing market: (i) housing rental and purchase prices co-move positively in response to productivity shocks, and (ii) the purchase price exhibits much larger volatile movements than the rental price in response to the shocks. A standard New Keynesian model with nominal rigidity in the production sector is inconsistent with these facts. We incorporate a rental market into an otherwise standard New Keynesian model with durables and show that nominal rigidity in the rental market contributes to our empirical findings.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 33848.
Date of creation: Sep 2011
Date of revision:
Productivity shock; price-rent ratio; housing prices;
Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
- R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-10-15 (All new papers)
- NEP-MAC-2011-10-15 (Macroeconomics)
- NEP-URE-2011-10-15 (Urban & Real Estate Economics)
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