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Housing Market Dynamics and the GFC: The Complex Dynamics of a Credit Shock

  • Arthur Grimes

    ()

    (Motu Economic and Public Policy Research and the University of Auckland)

  • Sean Hyland

    ()

    (Motu Economic and Public Policy Research)

We analyse the multiple channels of influence that GFC-induced credit restrictions had on New Zealand’s subnational housing markets. Our model isolates dynamics caused by impacts on the supply and the demand sides of the market. These dynamics are compared to those caused by a migration shock, a more common form of housing shock in New Zealand. We focus on the impacts on two outcome variables: house prices and housing supply; both shocks cause substantial cyclical adjustments in each variable. Similar cyclical dynamics could complicate the conduct of macro-prudential policies which are designed to affect bank credit allocation.

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File URL: http://motu-www.motu.org.nz/wpapers/13_12.pdf
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Paper provided by Motu Economic and Public Policy Research in its series Working Papers with number 13_12.

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Length: 39 pages
Date of creation: Oct 2013
Date of revision:
Handle: RePEc:mtu:wpaper:13_12
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  1. Pain, Nigel & Westaway, Peter, 1997. "Modelling structural change in the UK housing market: A comparison of alternative house price models," Economic Modelling, Elsevier, vol. 14(4), pages 587-610, October.
  2. Joseph Gyourko & Eduardo Morales & Charles Nathanson & Edward Glaeser, 2011. "Housing Dynamics," 2011 Meeting Papers 307, Society for Economic Dynamics.
  3. Arthur Grimes & Yun Liang, 2007. "Spatial Determinants of Land Prices in Auckland:Does the Metropolitan Urban Limit Have an Effect?," Working Papers 07_09, Motu Economic and Public Policy Research.
  4. Arthur Grimes & Sean Hyland & Andrew Coleman & James Kerr & Alex Collier, 2013. "A New Zealand Regional Housing Model," Working Papers 13_02, Motu Economic and Public Policy Research.
  5. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  6. Stijn Van Nieuwerburgh & Pierre-Olivier Weill, 2010. "Why Has House Price Dispersion Gone Up?," Review of Economic Studies, Oxford University Press, vol. 77(4), pages 1567-1606.
  7. Glaeser, Edward L. & Gyourko, Joseph & Saiz, Albert, 2008. "Housing supply and housing bubbles," Journal of Urban Economics, Elsevier, vol. 64(2), pages 198-217, September.
  8. Iris Claus & Arthur Grimes, 2003. "Asymmetric Information, Financial Intermediation and the Monetary Transmission Mechanism: A Critical Review," Treasury Working Paper Series 03/19, New Zealand Treasury.
  9. Oded Palmon & Baron A. Smith, 1998. "New Evidence on Property Tax Capitalization," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 1099-1128, October.
  10. Arthur Grimes & Andrew Aitken, 2007. "House Prices and Rents: Socio-Economic Impacts and Prospects," Working Papers 07_01, Motu Economic and Public Policy Research.
  11. Arthur Grimes & Andrew Aitken, 2010. "Housing Supply, Land Costs and Price Adjustment," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 38(2), pages 325-353.
  12. Albert Saiz, 2010. "The Geographic Determinants of Housing Supply," The Quarterly Journal of Economics, MIT Press, vol. 125(3), pages 1253-1296, August.
  13. International Monetary Fund, 2011. "Macroprudential Policy; What Instruments and How to Use them? Lessons From Country Experiences," IMF Working Papers 11/238, International Monetary Fund.
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