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Land-price dynamics and macroeconomic fluctuations with nonseparable preferences

Author

Listed:
  • Liutang Gong

    (Guanghua School of Management and LMEQF, Peking University)

  • Chan Wang

    (School of Finance, Central University of Finance and Economics)

  • Fuyang Zhao

    (Guanghua School of Management and LMEQF, Peking University)

  • Heng-fu Zou

    (China Economics and Management Academy, Central University of Finance and Economics)

Abstract

In this paper, we introduce a complementary relationship between consumption and labor hours by revising the household's period utility function in Liu et al. (2013). The revision concomitantly allows for a finite Frisch elasticity of labor supply and a stronger consumption smoothing motive. We find that, in general, the estimation of Liu et al. (2013) is quite robust. In addition, the propagation mechanism of the credit constraint triggered by a housing demand shock still persists. However, the amplification effect of the credit constraint triggered by the housing demand shock on key macroeconomic variables is greatly muted. We also find that, except for land price fluctuations, the housing demand shock cannot act as the primary force to drive the fluctuations in other macroeconomic variables.

Suggested Citation

  • Liutang Gong & Chan Wang & Fuyang Zhao & Heng-fu Zou, 2017. "Land-price dynamics and macroeconomic fluctuations with nonseparable preferences," CEMA Working Papers 605, China Economics and Management Academy, Central University of Finance and Economics.
    • Handle: RePEc:cuf:wpaper:605
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    References listed on IDEAS

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    Cited by:

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    2. J. Scott Davis & Kevin X. D. Huang & Ayse Sapci, 2020. "Imperfect substitution in real estate markets and the effect of housing demand on corporate investment," Vanderbilt University Department of Economics Working Papers 20-00002, Vanderbilt University Department of Economics.
    3. Davis, J. Scott & Huang, Kevin X.D. & Sapci, Ayse, 2022. "Land price dynamics and macroeconomic fluctuations with imperfect substitution in real estate markets," Journal of Economic Dynamics and Control, Elsevier, vol. 134(C).
    4. Jensen, Henrik & Ravn, Søren Hove & Santoro, Emiliano, 2018. "Changing credit limits, changing business cycles," European Economic Review, Elsevier, vol. 102(C), pages 211-239.

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    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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