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House-Price Crash and Macroeconomic Crisis: A Hong Kong Case Study

Listed author(s):
  • Zhang, Tongbin
  • Hu, Bo

House prices crash has become an important feature of macroeconomic crisis. We argue that house prices crash driven by contractionary monetary policy is not only a reaction to crisis, but also accelerates and amplifies the fluctuations of major macroeconomic variable. In this paper, we conduct a case study of Hong Kong in the 1997-1998 financial crisis and quantitatively analyze the mechanism by developing a general equilibrium model incorporating financial accelerator mechanism into both household and entrepreneur sectors. After estimating and simulating the model, impulse response results imply that our model can explain the co-movement of house prices, consumption, and investment better than the alternative models.

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File URL: https://mpra.ub.uni-muenchen.de/34962/1/MPRA_paper_34962.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 34962.

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Date of creation: 22 Nov 2011
Handle: RePEc:pra:mprapa:34962
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  25. repec:fth:harver:1435 is not listed on IDEAS
  26. Fabio Canova, 2007. "DSGE Models, Solutions, and Approximations, from Methods for Applied Macroeconomic Research," Introductory Chapters, in: Methods for Applied Macroeconomic Research Princeton University Press.
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