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Winners and Losers in Housing Markets

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Author Info
Nobuhiro Kiyotaki
Alexander Michaelides
Kalin Nikolov
Abstract

This paper is a quantitatively-oriented theoretical study into the interaction between housing prices, aggregate production, and household behaviour over a lifetime. We develop a life-cycle model of a production economy in which land and capital are used to build residential and commercial structures. We find that, in an economy where the share of land in the value of structures is large, housing prices react more to an exogenous change in expected productivity or the world interest rate, causing large redistribution effects between net buyers and net sellers of houses. Changing the financing constraint, however, has limited effects on housing prices.

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File URL: http://www.st-andrews.ac.uk/economics/CDMA/papers/cp0705.pdf
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Publisher Info
Paper provided by Centre for Dynamic Macroeconomic Analysis in its series CDMA Conference Paper Series with number 0705.

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Date of creation: Nov 2007
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Handle: RePEc:san:cdmacp:0705

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Related research
Keywords: Real estates; Land; Housing Prices; Life cycle; Collateral constraints.;

Find related papers by JEL classification:
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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References listed on IDEAS
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.:
  1. FRANÇOIS ORTALO-MAGNÉ & SVEN RADY, 2006. "Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraints," Review of Economic Studies, Blackwell Publishing, vol. 73(2), pages 459-485, 04. [Downloadable!] (restricted)
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  2. Collins, William J. & Margo, Robert A., 2001. "Race and Home Ownership: A Century-Long View," Explorations in Economic History, Elsevier, vol. 38(1), pages 68-92, January. [Downloadable!] (restricted)
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  3. Joao F. Cocco, 2005. "Portfolio Choice in the Presence of Housing," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 18(2), pages 535-567. [Downloadable!] (restricted)
  4. Morris A. Davis & Jonathan Heathcote, 2005. "Housing And The Business Cycle," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(3), pages 751-784, 08. [Downloadable!] (restricted)
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  5. Haughwout, Andrew F. & Inman, Robert P., 2001. "Fiscal policies in open cities with firms and households," Regional Science and Urban Economics, Elsevier, vol. 31(2-3), pages 147-180, April. [Downloadable!] (restricted)
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  6. Antonia Díaz & Maria Jose Luengo-Prado, 2006. "The Wealth Distribution With Durable Goods," Economics Working Papers we067027, Universidad Carlos III, Departamento de Economía. [Downloadable!]
  7. Gervais, Martin, 2002. "Housing taxation and capital accumulation," Journal of Monetary Economics, Elsevier, vol. 49(7), pages 1461-1489, October. [Downloadable!] (restricted)
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  8. Kiyotaki, Nobuhiro & Moore, John, 1997. "Credit Cycles," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 211-48, April.
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  9. 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. [Downloadable!] (restricted)
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  10. Gertler, Mark, 1999. "Government debt and social security in a life-cycle economy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 50(1), pages 61-110, June. [Downloadable!] (restricted)
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  11. Silos, Pedro, 2007. "Housing, portfolio choice and the macroeconomy," Journal of Economic Dynamics and Control, Elsevier, vol. 31(8), pages 2774-2801, August. [Downloadable!] (restricted)
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  12. Pierre-Olivier Gourinchas & Jonathan A. Parker, 2002. "Consumption Over the Life Cycle," Econometrica, Econometric Society, vol. 70(1), pages 47-89, January. [Downloadable!] (restricted)
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  13. Yoshiro Miwa & Matthew Chambers & Carlos Garriga & Don E. Schlagenhauf, 2004. "Accounting for Changes in the Homeownership Rate," CIRJE F-Series CIRJE-F-312, CIRJE, Faculty of Economics, University of Tokyo. [Downloadable!]
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  14. Attanasio, Orazio P, et al, 1999. "Humps and Bumps in Lifetime Consumption," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 22-35, January.
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  15. Huggett, Mark, 1993. "The risk-free rate in heterogeneous-agent incomplete-insurance economies," Journal of Economic Dynamics and Control, Elsevier, vol. 17(5-6), pages 953-969. [Downloadable!] (restricted)
  16. Aiyagari, S Rao, 1994. "Uninsured Idiosyncratic Risk and Aggregate Saving," The Quarterly Journal of Economics, MIT Press, vol. 109(3), pages 659-84, August. [Downloadable!] (restricted)
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  17. Todd Sinai & Nicholas S. Souleles, 2005. "Owner-Occupied Housing as a Hedge Against Rent Risk," The Quarterly Journal of Economics, MIT Press, vol. 120(2), pages 763-789, May.
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  18. Cole, Harold L & Kocherlakota, Narayana R, 2001. "Efficient Allocations with Hidden Income and Hidden Storage," Review of Economic Studies, Blackwell Publishing, vol. 68(3), pages 523-42, July.
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Cited by:
(explanations, 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.)

  1. Kaiji Chen, . "A Life-Cycle Analysis of Social Security with Housing," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics. [Downloadable!] (restricted)
    Other versions:
  2. Andreas Hornstein, 2009. "Problems for a fundamental theory of house prices," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 1-24. [Downloadable!]
  3. Arce, Oscar & López-Salido, J David, 2008. "Housing Bubbles," CEPR Discussion Papers 6932, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  4. Wenli Li & Haiyong Liu & Rui Yao, 2009. "Housing over time and over the life cycle: a structural estimation," Working Papers 09-7, Federal Reserve Bank of Philadelphia. [Downloadable!]
  5. James A. Kahn, 2008. "What drives housing prices?," Staff Reports 345, Federal Reserve Bank of New York. [Downloadable!]
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