Housing market spillovers: Evidence from an estimated DSGE model

Matteo Iacoviello and Stefano Neri

No 659, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: The ability of a two-sector model to quantify the contribution of the housing market to business fluctuations is investigated using U.S. data and Bayesian methods. The estimated model, which contains nominal and real rigidities and collateral constraints, displays the following features: first, a large fraction of the upward trend in real housing prices over the last 40 years can be accounted for by slow technological progress in the housing sector; second, residential investment and housing prices are very sensitive to monetary policy and housing demand shocks; third, the wealth effects from housing on consumption are positive and significant, and have become more important over time. The structural nature of the model allows identifying and quantifying the sources of fluctuations in house prices and residential investment and measuring the contribution of housing booms and busts to business cycles.

Keywords: House prices; Collateral Constraints; Bayesian methods; Two-sector Models (search for similar items in EconPapers)
JEL-codes: E32 E44 E47 R21 R31 (search for similar items in EconPapers)
Date: 2008-01
New Economics Papers: this item is included in nep-bec, nep-cba, nep-dge, nep-geo, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (68)

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Related works:
Journal Article: Housing Market Spillovers: Evidence from an Estimated DSGE Model (2010)
Working Paper: Housing Market Spillovers: Evidence from an Estimated DSGE Model (2009)
Working Paper: Housing market spillovers: evidence from an estimated DSGE model (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_659_08

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