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Towards Applied Disequilibrium Growth Theory: V Housing Investment Cycles, Private Debt Accumulation and Deflation

In this paper we reconsider a general disequilibrium model of an applied orientation, exhibiting a detailed modelling of the private housing sector, which we have developed in a series of working papers starting from the Murphy model for the Australian economy. This modelling approach is complete with respect to budget equations and stock-flow interactions and can be reduced to a somewhat simplified 18D core model, the dynamics of which was intensively studied in the earlier work. In the present paper we modify this type of model towards the explicit consideration of debtor and creditor households which extends the dynamics of the core model by 1 to 19D by the addition of the dynamics of the debt to capital ratio of indebted households. Various subdynamics of these 19D dynamics are investigated theoretically and illustrated numerically. The basic findings are that there is convergence to the balanced growth path of the model for sluggish disequilibrium adjustment processes, that persistent investment cycles in the housing sector can be generated for certain higher adjustment speeds by way of Hopf-bifurcations in particular. Furthermore processes of debt deflation my trigger monotonic depressions that get more and more severe when the real debt of debtor households is systematically increased by deflationary spirals in the goods manufacturing sector in particular.

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File URL: http://www.finance.uts.edu.au/research/wpapers/wp97.pdf
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Paper provided by Finance Discipline Group, UTS Business School, University of Technology, Sydney in its series Working Paper Series with number 97.

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Date of creation: 01 Apr 2003
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Handle: RePEc:uts:wpaper:97
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Web page: http://www.uts.edu.au/about/uts-business-school/finance

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  1. Ray C. Fair, 2000. "Testing the NAIRU Model for the United States," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 64-71, February.
  2. Carl Chiarella & Peter Flaschel & Peiyuan Zhu, 2003. "Towards Applied Disequilibrium Growth Theory: IV Numerical Investigations of the Core 18D Model," Working Paper Series 96, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
  3. Carl Chiarella & Peter Flaschel, 1999. "Towards Applied Disequilibrium Growth Theory: III Basic Partial Feedback Structures and Stability Issues," Working Paper Series 95, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
  4. Chiarella,Carl & Flaschel,Peter, 2011. "The Dynamics of Keynesian Monetary Growth," Cambridge Books, Cambridge University Press, number 9780521180184.
  5. Gabriel, Stuart A. & Nothaft, Frank E., 2001. "Rental Housing Markets, the Incidence and Duration of Vacancy, and the Natural Vacancy Rate," Journal of Urban Economics, Elsevier, vol. 49(1), pages 121-149, January.
  6. Carl Chiarella & Peter Flaschel & Willi Semmler, 2000. "Price Flexibility and Debt Dynamics in a High Order AS-AD Model," Working Paper Series 109, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
  7. Carl Chiarella & Peter Flaschel & G. Groh & C. Köper & Willi Semmler, 1999. "Towards Applied Disequilibrium Growth Theory: VII Intensive Form and Steady State Calculation in the Case of Substitution," Working Paper Series 99, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
  8. Carl Chiarella & Peter Flaschel, 1999. "Towards Applied Disequilibrium Growth Theory: II Intensive Form and Steady State Analysis of the Model," Working Paper Series 94, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
  9. Donald A. Walker (ed.), 2000. "Equilibrium," Books, Edward Elgar, volume 0, number 1585, March.
  10. Rosen, Kenneth T & Smith, Lawrence B, 1983. "The Price-Adjustment Process for Rental Housing and the Natural Vacancy Rate," American Economic Review, American Economic Association, vol. 73(4), pages 779-86, September.
  11. Laxton, Douglas & Rose, David & Tambakis, Demosthenes, 1999. "The U.S. Phillips curve: The case for asymmetry," Journal of Economic Dynamics and Control, Elsevier, vol. 23(9-10), pages 1459-1485, September.
  12. Hendershott, Patric H., 1996. "Rental Adjustment and Valuation in Overbuilt Markets: Evidence from the Sydney Office Market," Journal of Urban Economics, Elsevier, vol. 39(1), pages 51-67, January.
  13. Shilling, James D. & Sirmans, C. F. & Corgel, John B., 1987. "Price adjustment process for rental office space," Journal of Urban Economics, Elsevier, vol. 22(1), pages 90-100, July.
  14. Carl Chiarella & Peter Flaschel & G. Groh & C. Köper & Willi Semmler, 1999. "Towards Applied Disequilibrium Growth Theory: VI Substitution, Money-Holdings, Wealth-Effects and Further Extensions," Working Paper Series 98, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
  15. Carl Chiarella & Peter Flaschel, 1999. "Towards Applied Disequilibrium Growth Theory: I The Starting Model," Working Paper Series 93, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
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