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The Dynamics and Volatility of Commercial and Residential Property Prices: Theory and Evidence

This paper investigates the dynamics of property prices and their interaction with output growth in a general equilibrium model. Closed form solutions and testable hypotheses are derived from a mildly restricted version of the model. The testable hypotheses are broadly supported empirically. In particular, (1) the volatility of commercial property prices is higher than that of residential property prices, (2) each of the lagged, contemporary, and forward commercial property prices is positively correlated with residential property prices, (3) the contemporaneous covariance between the two property prices is larger than the lagged covariance, and (4) output growth is positively correlated with both property prices. These results are consistent with simulations results that are based on a more general specification of the model.

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Paper provided by Institute of Economics, Academia Sinica, Taipei, Taiwan in its series IEAS Working Paper : academic research with number 03-A004.

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Length: 40 pages
Date of creation: Nov 2003
Date of revision:
Handle: RePEc:sin:wpaper:03-a004
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Web page: http://www.econ.sinica.edu.tw/index.php?foreLang=en
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  1. Michael Gort & Jeremy Greenwood & Peter Rupert, 1999. "Measuring the Rate of Technological Progress in Structures," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 2(1), pages 207-230, January.
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  16. Kamhon Kan & Sunny Kai-Sun Kwong & Charles Ka-Yui Leung, 2003. "The Dynamics and Volatility of Commercial and Residential Property Prices: Theory and Evidence," IEAS Working Paper : academic research 03-A004, Institute of Economics, Academia Sinica, Taipei, Taiwan.
  17. Lau, Sau-Him Paul, 2002. "Further Inspection Of The Stochastic Growth Model By An Analytical Approach," Macroeconomic Dynamics, Cambridge University Press, vol. 6(05), pages 748-757, November.
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  28. repec:uwo:uwowop:9104 is not listed on IDEAS
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