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From Shirtsleeves to Shirtsleeves in a Long Lifetime

  • Kalin Nikolov

    (Bank of England and LSE)

  • Alex Michaelides

    (LSE)

  • Nobuhiro Kiyotaki

    (Princeton)

This paper is a quantitatively-oriented theoretical study into the interaction between housing prices, aggregate production, and household behaviour over a lifetime. We develop an overlapping generations model of a production economy in which land and capital are combined into residential and commercial structures. We find that, in the economy where land is more important for structures, the housing price is more sensitive to changes in technology; and, in the steady state, households face a higher house price-rental ratio and buy houses later in life. On the other hand, relaxing collateral constraints has a limited impact on housing prices and aggregate production in the transition to a new steady state, even though it encourages households to buy houses earlier in life, resulting in first order welfare gains.

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File URL: https://www.economicdynamics.org/meetpapers/2007/paper_357.pdf
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Paper provided by Society for Economic Dynamics in its series 2007 Meeting Papers with number 357.

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Date of creation: 2007
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Handle: RePEc:red:sed007:357
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  1. Matthew Chambers & Carlos Garriga & Don E. Schlagenhauf, 2009. "Accounting For Changes In The Homeownership Rate," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(3), pages 677-726, 08.
  2. William J.Collins & Robert A. Margo, 2000. "Race and Home Ownership: A Century-Long View," Vanderbilt University Department of Economics Working Papers 0012, Vanderbilt University Department of Economics.
  3. Per Krusell & Anthony A. Smith, Jr., . "Income and Wealth Heterogeneity in the Macroeconomy," GSIA Working Papers 1997-37, Carnegie Mellon University, Tepper School of Business.
  4. Andrew Haughwout & Robert P. Inman, 2000. "Fiscal Policies in Open Cities with Firms and Households," NBER Working Papers 7823, National Bureau of Economic Research, Inc.
  5. Angus Deaton, 1989. "Saving and Liquidity Constraints," NBER Working Papers 3196, National Bureau of Economic Research, Inc.
  6. Kosuke Aoki & James Proudman & Gertjan Vlieghe, 2002. "House prices, consumption, and monetary policy: a financial accelerator approach," Bank of England working papers 169, Bank of England.
  7. Davis, Morris & Heathcote, Jonathan, 2001. "Housing and the Business Cycle," Working Papers 01-09, Duke University, Department of Economics.
  8. Andrew Caplin & Sewin Chan & Charles Freeman & Joseph Tracy, 1997. "Housing Partnerships: A New Approach to a Market at a Crossroads," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262032430, June.
  9. Harold L Cole & Narayana Kocherlakota, 2010. "Efficient Allocations with Hidden Income and Hidden Storage," Levine's Working Paper Archive 1909, David K. Levine.
  10. Diaz-Gimenez, Javier & Prescott, Edward C. & Fitzgerald, Terry & Alvarez, Fernando, 1992. "Banking in computable general equilibrium economies," Journal of Economic Dynamics and Control, Elsevier, vol. 16(3-4), pages 533-559.
  11. V. Sanchez-Marcos & J.V.Rios-Rull, 2005. "Aggregate Shocks and the Volatility of House Prices," 2005 Meeting Papers 648, Society for Economic Dynamics.
  12. Raymond W. Goldsmith, 1962. "The National Wealth of the United States in the Postwar Period," NBER Books, National Bureau of Economic Research, Inc, number gold62-1, 07.
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