IDEAS home Printed from https://ideas.repec.org/a/elg/ejeepi/v7y2010i2p361-375.html
   My bibliography  Save this article

Kaldorian boom-bust cycles in the housing market

Author

Listed:
  • Ingo Barens

    (Darmstadt University of Technology)

  • Peter Flaschel

    (Bielefeld University)

  • Florian Hartmann

    () (University of Osnabrück)

  • Andreas Röthig

    (Darmstadt University of Technology)

Abstract

We show that the Kaldor (1940) trade cycle mechanism can be meaningfully applied to the market for residential housing space, since the demand for houses may be positively related to the housing price in a mid-range price domain, while it is downward sloping for house prices sufficiently small as well as sufficiently large. Confronted with the current supply of houses this gives rise to multiple equilibria. Then the employed nonlinear house demand schedule is coupled with backward-looking house price expectations and a planar dynamics is obtained with the same range of model-consistent expectations equilibria as in the partial situation studied beforehand. The model however is not dependent on the backward oriented expectation scheme, but also applies to the case of myopic perfect foresight. The nonlinear demand function for houses in connection with changes in the housing stock initiates sudden reversals from booms into busts and vice versa, which from a mathematical point of view give locally rise to fold catastrophes at the bifurcation points, with the dynamics being described by relaxation oscillations from the global perspective.

Suggested Citation

  • Ingo Barens & Peter Flaschel & Florian Hartmann & Andreas Röthig, 2010. "Kaldorian boom-bust cycles in the housing market," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 7(2), pages 361-375.
    • Handle: RePEc:elg:ejeepi:v:7:y:2010:i:2:p361-375
    as

    Download full text from publisher

    File URL: http://www.elgaronline.com/view/journals/ejeep/7-2/ejeep.2010.02.11.xml
    Download Restriction: no

    References listed on IDEAS

    as
    1. Jorg Bibow, 2008. "The International Monetary (Non-)Order and the 'Global Capital Flows Paradox'," Economics Working Paper Archive wp_531, Levy Economics Institute.
    2. Escaith, Hubert, 2009. "Trade Collapse, Trade Relapse and Global Production Networks: Supply Chains in the Great Recession," MPRA Paper 18274, University Library of Munich, Germany.
    3. Bernanke, Ben S., 2009. "Asia and the global financial crisis (welcome address)," Proceedings, Federal Reserve Bank of San Francisco, issue Oct, pages 11-12.
    4. Mark A. Wynne & Erasmus K. Kersting, 2009. "Trade, globalization and the financial crisis," Economic Letter, Federal Reserve Bank of Dallas, vol. 4(nov).
    5. Malouche, Mariem, 2009. "Trade and trade finance developments in 14 developing countries post September 2008 - a World Bank survey," Policy Research Working Paper Series 5138, The World Bank.
    6. Naohiko Baba & Robert N McCauley & Srichander Ramaswamy, 2009. "US dollar money market funds and non-US banks," BIS Quarterly Review, Bank for International Settlements, March.
    7. Wynne Godley & Dimitri B. Papadimitriou & Greg Hannsgen & Gennaro Zezza, 2007. "The U.S. Economy: Is There a Way Out of the Woods?," Economics Strategic Analysis Archive sa_nov_07, Levy Economics Institute.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Colacchio, Giorgio, 2014. "Taxation, income redistribution and debt dynamics in a seven-equation model of the business cycle," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 140-165.

    More about this item

    Keywords

    Kaldorian trade cycles; boom-bust cycles; housing markets; relaxation oscillations;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

    Statistics

    Access and download statistics

    Corrections

    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:elg:ejeepi:v:7:y:2010:i:2:p361-375. 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: (Katie Smith). General contact details of provider: http://www.elgaronline.com/ejeep .

    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.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with 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.