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The Real Price of Housing and Money Supply Shocks: Time Series Evidence and Theoretical Simulations

  • Lastrapes, William D.

I estimate the dynamic responses of owner-occupied housing prices to money supply shocks, and compare these responses to those predicted by a dynamic equilibrium model of the housing market. The empirical responses are identified from general sets of restrictions that are consistent with a wide class of theoretical models. Using monthly data, I find that money shocks have real effects on the housing market: both relative housing prices and real sales rise in the short-run in response to positive shocks to the money supply. The estimated price responses closely match the predictions of the theoretical model for reasonable values of the theoretical parameters.

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Article provided by Elsevier in its journal Journal of Housing Economics.

Volume (Year): 11 (2002)
Issue (Month): 1 (March)
Pages: 40-74

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Handle: RePEc:eee:jhouse:v:11:y:2002:i:1:p:40-74
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622881

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