Replication data for: A Macroeconomic Model of Price Swings in the Housing Market

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Project Citation:

Garriga, Carlos, Manuelli, Rodolfo, and Peralta-Alva, Adrian. Replication data for: A Macroeconomic Model of Price Swings in the Housing Market. Nashville, TN: American Economic Association [publisher], 2019. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-12. https://doi.org/10.3886/E112975V1

Project Description

Summary: This paper shows that a macro model with segmented financial markets can generate sizable movements in housing prices in response to changes in credit conditions. We establish theoretically that reductions in mortgage rates always have a positive effect on prices, whereas the relaxation of loan-to-value constraints has ambiguous effects. A quantitative version of the model under perfect foresight accounts for about one-half of the observed price increase in the United States in the 2000s. When we include shocks to expectations about housing finance conditions, the model's ability to match house values improves significantly. The framework reconciles the observed disconnect between house prices and rents since, in general equilibrium, financial shocks can decrease rents and increase prices.

Scope of Project

JEL Classification:
      E44 Financial Markets and the Macroeconomy
      G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
      R31 Housing Supply and Markets

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V1 [2019-10-12]

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