Housing Market Drivers and Dynamics in Armenia

Haykaz Igityan () and Hasmik Kartashyan ()
Additional contact information
Haykaz Igityan: Monetary Policy Department, Central Bank of Armenia
Hasmik Kartashyan: Monetary Policy Department, Central Bank of Armenia

No 16, Working Papers from Central Bank of Armenia

Abstract: This paper develops VAR model for Armenia with housing price and estimates the impact of housing price on GDP growth and inflation. Passthrough results show, that 1% increase in real housing price creates from 0.03 to 0.09% inflation and increases GDP by around 0.25% in the long run. Paper then discusses simple housing decision model and incorporates it into DSGE framework. Households are allowed to divide their disposable housing stock into private consumption and lend out to firms for commercial purposes. Having borrowing constraint in the model enables to generate both borrowing and housing cycles. Balance sheet channel allows to explain the empirically observed estimates of the effects of housing prices on the Armenian economy. According to the theoretical model’s results, the long-run response of inflation to the real housing price increase as a result of housing market’s specific shocks is estimated to lie in the interval of 0.045-0.118%, which is very close to empirical estimates. Moreover, model estimated commercial housing preference cycle is consistent with historical events of the Armenian economy.

Keywords: Commercial and personal housing; Real estate; Housing price; DSGE model; Borrowing constraint; Bayesian Estimation (search for similar items in EconPapers)
JEL-codes: E31 E44 E52 R21 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2021-01
New Economics Papers: this item is included in nep-cis, nep-dge, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in CBA Working Paper Series, January 2021

Downloads: (external link)
https://www.cba.am/EN/panalyticalmaterialsresearches/Housing_Model.pdf First version, 2021 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ara:wpaper:016

Access Statistics for this paper

More papers in Working Papers from Central Bank of Armenia Contact information at EDIRC.
Bibliographic data for series maintained by Davit Hovhannisyan ( this e-mail address is bad, please contact ).