An Equilibrium Model of Lumpy Housing Investment

Matteo Iacoviello () and Marina Pavan ()

Rivista di Politica Economica, 2007, vol. 97, issue 2, pages 15-44

Abstract: We formulate and solve a dynamic general equilibrium model with heterogeneous agents and lumpy housing adjustment at the household level. We use the model to ask a simple question: how does the microeconomic lumpiness of housing adjustment affect the equilibrium dynamic properties of aggregate consumption and investment? Our main conclusion is that lumpiness matters: in particular, lumpiness in housing adjustment (1) reduces the volatility of both housing and business investment; (2) increases the volatility of aggregate consumption; (3) increases the correlation of housing investment with business investment and with GDP. We also show that lumpiness of investment activity at the household level has small but significant aggregate implications, in contrast with the literature that shows that the aggregate effects of lumpy investment at the firm level are negligible.

JEL-codes: E21 E32 E44 D91 (search for similar items in EconPapers)
Date: 2007
View list of references

Downloads: (external link)
http://www.rivistapoliticaeconomica.it/2007/mar-apr/Iacoviello_Pavan.pdf

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:rpo:ripoec:v:97:y:2007:i:2:p:15-44

Access Statistics for this article

Rivista di Politica Economica is edited by Gustavo Piga

More articles in Rivista di Politica Economica from SIPI Spa
Series data maintained by Sabrina Marino ().