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International capital flows and expectation-driven boom-bust cycles in the housing market

  • Tomura, Hajime

This paper analyzes the roles of credit market conditions in endogenous formation of housing-market boom-bust cycles in a business cycle model. When households are uncertain about the duration of a temporary high income growth period, expected future house prices rise during the high growth period and fall at the end of the period. But this development causes expectation-driven boom-bust cycles in current house prices only if the economy is open to international capital flows. It is also shown that high maximum loan-to-value ratios for residential mortgages per se do not cause boom-bust cycles without international capital flows in the model.

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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 34 (2010)
Issue (Month): 10 (October)
Pages: 1993-2009

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Handle: RePEc:eee:dyncon:v:34:y:2010:i:10:p:1993-2009
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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