Learning and the Market for Housing

Eyno Rots

No 2015/4, MNB Working Papers from Magyar Nemzeti Bank (Central Bank of Hungary)

Abstract: House prices have inertia, which may be because housing-market participants need time to recognize long booms and recessions. Within a dynamic stochastic general-equilibrium model with markets for housing and defaultable mortgages, I consider the case of imperfect knowledge and learning about the persistence of exogenous shocks. I evaluate the performance of the model against the last 40 years of key U.S. macroeconomic data. Bayesian comparison strongly favors the model with learning over the baseline case with perfect knowledge, although additional assumptions about the learning process may be necessary for an adequate account of house-price dynamics.

Keywords: housing market; DSGE; signal extraction; Bayesian estimation. (search for similar items in EconPapers)
JEL-codes: E32 E37 R31 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2015
New Economics Papers: this item is included in nep-dge, nep-mac and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:mnb:wpaper:2015/4

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