Real interest policy and the housing cycle

Benjamin Eden ()

No 19-00002, Vanderbilt University Department of Economics Working Papers from Vanderbilt University Department of Economics

Abstract: I use a model of rational bubbles to discuss the effects of government loans and its real interest policy on the possibility of cycles. Cycles occur when the government is willing to lend to the young generation. Cycles do not occur if the government does not lend and the interest rate is sufficiently high. The level of interest required to discourage cycles (in the no lending case) is high when the rate of technological change in the non-housing sector is high relative to the rate of technological change in the housing sector.

Keywords: Housing-cycles; Interest Rate; Bubbles; Government loans (search for similar items in EconPapers)
JEL-codes: E3 E6 (search for similar items in EconPapers)
Date: 2019-03-25
New Economics Papers: this item is included in nep-dge, nep-mac and nep-ure
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Related works:
Working Paper: REAL INTEREST POLICY AND THE HOUSING CYCLE (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:van:wpaper:vuecon-sub-19-00002

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