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Regulating Speculative Housing Markets via Public Housing Construction Programs: Insights from a Heterogeneous Agent Model

Author

Listed:
  • Martin Carolin

    (University of Bamberg, Feldkirchenstr. 21, 96047Bamberg, Germany)

  • Westerhoff Frank

    (University of Bamberg, Feldkirchenstr. 21, 96047Bamberg, Germany)

Abstract

Since the instability of housing markets may be quite harmful for the real economy, we explore whether public housing construction programs may tame housing market fluctuations. As a workhorse, we use a behavioral stock-flow housing market model in which the complex interplay between speculative and real forces triggers reasonable housing market dynamics. Simulations reveal that plausible and well-intended policy measures may turn out to be a mixed blessing. While public housing construction programs may reduce house prices, they seem to be incapable of bringing house prices much closer towards their fundamental values. In addition, these programs tend to drive out private housing constructions.

Suggested Citation

  • Martin Carolin & Westerhoff Frank, 2019. "Regulating Speculative Housing Markets via Public Housing Construction Programs: Insights from a Heterogeneous Agent Model," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 239(4), pages 627-660, August.
    • Handle: RePEc:jns:jbstat:v:239:y:2019:i:4:p:627-660:n:3
    DOI: 10.1515/jbnst-2018-0042
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    Cited by:

    1. Martin, Carolin & Schmitt, Noemi & Westerhoff, Frank, 2022. "Housing Markets, Expectation Formation And Interest Rates," Macroeconomic Dynamics, Cambridge University Press, vol. 26(2), pages 491-532, March.
    2. Carro, Adrian, 2023. "Taming the housing roller coaster: The impact of macroprudential policy on the house price cycle," Journal of Economic Dynamics and Control, Elsevier, vol. 156(C).

    More about this item

    Keywords

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    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • 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

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