IDEAS home Printed from
   My bibliography  Save this article

Joint Adjustment of House Prices, Stock Prices and Output Towards Short-run Equilibrium


  • Thomas Grandner
  • Dieter Gstach


A dynamic IS-LM model including houses and stocks as additional assets will be analysed in this paper. Providing also housing services, a major consumption item for most households, houses create an additional link between the monetary and the real sector, distinct from the traditional wealth effect channel. We analyse the adjustment path of output, house prices and stock prices after policy shocks within a rational expectation setup. Depending crucially on the elasticity of housing services demand, different reaction patterns of asset prices will emerge. The results are contrasted with relevant empirical findings, particularly Lastrapes (Journal of Housing Economics, 11 (2002), pp. 40-74), leading to the identification of plausible elasticity ranges. The analysis sheds new light on the ongoing discussion about demand effects from changing real estate wealth and about determinants of house price fluctuations. Copyright Blackwell Publishers Ltd and the Board of Trustees of the Bulletin of Economic Research, 2006.

Suggested Citation

  • Thomas Grandner & Dieter Gstach, 2006. "Joint Adjustment of House Prices, Stock Prices and Output Towards Short-run Equilibrium," Bulletin of Economic Research, Wiley Blackwell, vol. 58(1), pages 1-17, January.
  • Handle: RePEc:bla:buecrs:v:58:y:2006:i:1:p:1-17

    Download full text from publisher

    File URL:
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item


    Access and download statistics


    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:bla:buecrs:v:58:y:2006:i:1:p:1-17. See general 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: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.