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Housing and the Business Cycle Revisited

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  • Daniel Fehrle

Abstract

In this paper, I present a multi-sectoral DSGE-model with housing, real rigidities and variable capital utilization that generates aggregate and sectoral co-movements due to sector specific shocks. Furthermore, the model accounts for two puzzles: First, residential investment correlates positively with house prices, and second, GDP residential and business investment tend toward the empirically observed lead-lag pattern. I show that, except for relative prices, all co-movements and the lead-lag pattern of different investment types are endogenous in the calibrated model and independent of the properties of the shock. In a second step, I estimate the these properties with Bayesian techniques. As it turns out, shocks to sectors with similar elasticities in the nal good sectors playa role related to aggregated shocks. In contradiction to a standard assumption in the literature, shocks to the construction sector seem to be lower than others.

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  • Daniel Fehrle, 2018. "Housing and the Business Cycle Revisited," Working Papers 178, Bavarian Graduate Program in Economics (BGPE).
  • Handle: RePEc:bav:wpaper:178_fehrle
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    Cited by:

    1. Daniel Fehrle & Johannes Huber, 2020. "Business cycle accounting for the German fiscal stimulus program during the Great Recession," Discussion Paper Series 339, Universitaet Augsburg, Institute for Economics.
    2. Daniel Fehrle & Christopher Heiberger, 2020. "The return on everything and the business cycle in production economies," Working Papers 193, Bavarian Graduate Program in Economics (BGPE).
    3. Chahrour, Ryan & Gaballo, Gaetano, 2019. "Learning from House Prices: Amplification and Business Fluctuations," CEPR Discussion Papers 14120, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    Housing market; sectoral and aggregate co-movements;

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • 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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