Sticky Rents and the Stability of Housing Cycles

Erdem Basci and Ismail Saglam

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: This paper presents a simple model of housing cycles in a two good economy. We establish that nonsubstitutability between housing services and other commodities along with high degree of heterogeneity in home ownership may lead to a stable spiral path converging to a steady-state equilibrium of rental price and housing stock. Key conditions for stability are a sufficiently sticky rent adjustment dynamics and a relatively rapid depreciation of per capita housing stock.

Keywords: Housing cycles; Sticky rents; Stability of equilibrium; Leontief utility (search for similar items in EconPapers)
JEL-codes: C62 D11 D51 R21 R31 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-mac and nep-ure
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Related works:
Working Paper: Sticky Rents and the Stability of Housing Cycles (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:0902

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