Stock Prices, Regional Housing Prices, and Aggregate Technology Shocks

Jiro Yoshida

No 72, HIT-REFINED Working Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: The correlation between stock and housing prices, which is critical for household asset allocations, varies widely by metropolitan area and country. A general equilibrium model demonstrates that an aggregate positive technology shock increases stock prices and housing demand but can decrease housing prices where land supply is elastic because stable future rents are discounted at higher interest rates. Using panel data of U.S. metropolitan areas and OECD countries, I find that the housing price response to TFP shocks as well as the stock-housing correlation are smaller and even negative where the housing supply is elastic. I also find that household equity investment is positively related to housing supply elasticity.

Keywords: macroeconomic shocks; total factor productivity; general equilibrium; regional heterogeneity; house price; housing supply elasticity; asset allocation (search for similar items in EconPapers)
JEL-codes: E32 G11 R21 R31 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2017-10
New Economics Papers: this item is included in nep-dge, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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