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A simple model of a speculative housing market

Listed author(s):
  • Roberto Dieci

    ()

  • Frank Westerhoff

We develop a simple model of a speculative housing market in which the demand for houses is influenced by expectations about future housing prices. Guided by empirical evidence, agents rely on extrapolative and regressive forecasting rules to form their expectations. The relative importance of these competing views evolves over time, subject to market circumstances. As it turns out, the dynamics of our model is driven by a two-dimensional nonlinear map which may display irregular boom and bust housing price cycles, as repeatedly observed in many actual markets. However, we also find that speculation may be a source of both stability and instability.

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File URL: http://hdl.handle.net/10.1007/s00191-011-0259-8
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Article provided by Springer in its journal Journal of Evolutionary Economics.

Volume (Year): 22 (2012)
Issue (Month): 2 (April)
Pages: 303-329

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Handle: RePEc:spr:joevec:v:22:y:2012:i:2:p:303-329
DOI: 10.1007/s00191-011-0259-8
Contact details of provider: Web page: http://www.springer.com

Order Information: Web: http://www.springer.com/economics/journal/191/PS2

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  1. Brock, William A. & Hommes, Cars H., 1998. "Heterogeneous beliefs and routes to chaos in a simple asset pricing model," Journal of Economic Dynamics and Control, Elsevier, vol. 22(8-9), pages 1235-1274, August.
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  12. Westerhoff, Frank H. & Dieci, Roberto, 2006. "The effectiveness of Keynes-Tobin transaction taxes when heterogeneous agents can trade in different markets: A behavioral finance approach," Journal of Economic Dynamics and Control, Elsevier, vol. 30(2), pages 293-322, February.
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  23. repec:arz:wpaper:eres2009-155 is not listed on IDEAS
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