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Housing and the business cycle revisited

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  • Fehrle, Daniel

Abstract

I present a multisectoral DSGE model with housing, real frictions, and variable capital utilization that generates aggregate and sectoral co-movements due to uncorrelated sector-specific shocks. Major advances are the robust positive correlations of residential investment with house prices and business investment. In addition, business investment is lagging other economic activities. The key improvements are adjustment costs to business investment. I identify the parameters of the exogenous shock processes, business adjustment costs, and variable capital utilization with Bayesian estimation; the results confirm those obtained from earlier work in this field.

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  • Fehrle, Daniel, 2019. "Housing and the business cycle revisited," Journal of Economic Dynamics and Control, Elsevier, vol. 99(C), pages 103-115.
    • Handle: RePEc:eee:dyncon:v:99:y:2019:i:c:p:103-115
    DOI: 10.1016/j.jedc.2018.12.004
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    Cited by:

    1. Daniel Fehrle & Christopher Heiberger, 2020. "The return on everything and the business cycle in production economies," Working Papers 193, Bavarian Graduate Program in Economics (BGPE).
    2. Balcilar, Mehmet & Roubaud, David & Uzuner, Gizem & Wohar, Mark E., 2021. "Housing sector and economic policy uncertainty: A GMM panel VAR approach," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 114-126.
    3. Ryan Chahrour & Gaetano Gaballo, 2021. "Learning from House Prices: Amplification and Business Fluctuations [House Price Booms and the Current Account]," Review of Economic Studies, Oxford University Press, vol. 88(4), pages 1720-1759.
    4. Daniel Fehrle & Johannes Huber, 2020. "Business cycle accounting for the German fiscal stimulus program during the Great Recession," Working Papers 197, Bavarian Graduate Program in Economics (BGPE).
    5. Suh, Hyunduk, 2023. "Regionally heterogeneous housing cycles and housing market stabilization policies: Evidence from Korea," Economic Modelling, Elsevier, vol. 120(C).

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    More about this item

    Keywords

    Housing market; Multisectoral co-movements; Aggregated co-movements;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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