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Housing Investment: What Makes It so Volatile? Theory and Evidence from OECD Countries

Author

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  • Quoc Hung Nguyen

    (Institute of Developing Economies)

Abstract

This paper explains how mortgage market liberalization can introduce greater volatility in the housing market, which is a stylized fact documented from OECD countries, with a DSGE model where households face a credit constraint and housing is used as collateral. The housing collateral constraint creates a link between the housing market and borrowing capacity, a link that ampli?es the response of housing demand to technology shocks and strengthens in economies with more liberalized mortgage markets. The calibrated model is able to explain about 90 percent of housing investment volatility in the UK.

Suggested Citation

  • Quoc Hung Nguyen, 2012. "Housing Investment: What Makes It so Volatile? Theory and Evidence from OECD Countries," Working Papers 119, Development and Policies Research Center (DEPOCEN), Vietnam.
    • Handle: RePEc:dpc:wpaper:0312
    DOI: 10.1016/j.jhe.2013.07.002
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    Cited by:

    1. is not listed on IDEAS
    2. Carlos Cañizares Martínez & Gabe J. de Bondt & Arne Gieseck, 2023. "Forecasting housing investment," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 42(3), pages 543-565, April.

    More about this item

    Keywords

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    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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