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User costs and bubbles in land markets

  • Schreyer, Paul
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    In asset markets with speculative behavior, the long-run equilibrium relationship between asset prices and the discounted flow of future rents may become invalid. We distinguish short-term user costs and longer-term user costs with variables that reflect fundamentals. We show how to work around the empirical problem of measuring speculative expectations about asset price changes and derive a simple user cost formula where the asset price change in the short-term relationship comes out as the long-run change in the overall price level.

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    File URL: http://www.sciencedirect.com/science/article/B6WJR-4WV15PR-3/2/08d8df7f1d3e65840a890f02c0e404f1
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    Article provided by Elsevier in its journal Journal of Housing Economics.

    Volume (Year): 18 (2009)
    Issue (Month): 3 (September)
    Pages: 267-272

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    Handle: RePEc:eee:jhouse:v:18:y:2009:i:3:p:267-272
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622881

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    1. Dale W. Jorgenson & Mun S. Ho & Kevin J. Stiroh, 2005. "Productivity, Volume 3: Information Technology and the American Growth Resurgence," MIT Press Books, The MIT Press, edition 1, volume 3, number 0262101114, June.
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    3. Diewert, W E, 1974. "Intertemporal Consumer Theory and the Demand for Durables," Econometrica, Econometric Society, vol. 42(3), pages 497-516, May.
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    5. Davis, Morris A. & Heathcote, Jonathan, 2007. "The price and quantity of residential land in the United States," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2595-2620, November.
    6. Randal Verbrugge & Thesia I. Garner, 2009. "Reconciling User Costs and Rental Equivalence: Evidence from the U.S. Consumer Expenditure Survey," Working Papers 427, U.S. Bureau of Labor Statistics.
    7. Goodman, Allen C. & Thibodeau, Thomas G., 2008. "Where are the speculative bubbles in US housing markets?," Journal of Housing Economics, Elsevier, vol. 17(2), pages 117-137, June.
    8. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, June.
    9. Tirole, Jean, 1982. "On the Possibility of Speculation under Rational Expectations," Econometrica, Econometric Society, vol. 50(5), pages 1163-81, September.
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