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The Impact of Housing Decisons on Business Cycles

Author

Listed:
  • Steve Ambler
  • Emanuela Cardia
  • Christian Zimmermann

    (Department of Economics University of Connecticut)

Abstract

This paper examines the role of housing decisions on business cycles fluctuations. We use an overlapping generation model where to acquire a house whose services are an argument in the utility function households have to save for a down payment and make a long term financial committment. Because of the indivisibility of housing, households buy "too much" housing and not always able to smooth consumptiom in face of adverse business cycle fluctuations. Consumers who are still in the early stage of paying off their houses have to decrease their consumption of other goods because of their committment to repay their debts on the house

Suggested Citation

  • Steve Ambler & Emanuela Cardia & Christian Zimmermann, 2005. "The Impact of Housing Decisons on Business Cycles," Computing in Economics and Finance 2005 372, Society for Computational Economics.
    • Handle: RePEc:sce:scecf5:372
    as

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    More about this item

    Keywords

    Business Cycles; Housing; Consumption; Real Business Cycles.;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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