Can I read A Theory of Housing Demand Shocks on EtoBox?

A Theory of Housing Demand Shocks by Ding Dong; Zheng Liu; Pengfei Wang; Tao Zha is a Economics, Econometrics and Finance article available to read on EtoBox.

What is A Theory of Housing Demand Shocks about?

Housing demand shocks in standard macroeconomic models are a primary source of house price fluctuations, but those models have difficulties in generating the observed large volatility of house prices relative to rents. We provide a microeconomic foundation for the reduced-form housing demand shocks with a tractable heterogenous-agent framework. In our model with heterogeneous beliefs, an expansion of credit supply raises housing demand of optimistic buyers and boosts house prices without affecting rents. A credit supply shock also leads to a positive correlation between house trading volumes and house prices. The theoretical mechanism and model predictions are supported by empirical evidence, and the results are robust to alternative specifications of heterogeneity.

Who reads A Theory of Housing Demand Shocks?

Author

Ding Dong; Zheng Liu; Pengfei Wang; Tao Zha

Publisher

Elsevier BV

Published

2022

Language

EN

Field

Economics, Econometrics and Finance (Social Sciences)