The Impact of Housing Decisons on Business Cycles

Steve Ambler, Emanuela Cardia and Christian Zimmermann ()

No 372, Computing in Economics and Finance 2005 from Society for Computational Economics

Abstract: This paper examines the role of housing decisions on business cycles fluctuations. We use an overlapping generation model where to acquire a house whose services are an argument in the utility function households have to save for a down payment and make a long term financial committment. Because of the indivisibility of housing, households buy "too much" housing and not always able to smooth consumptiom in face of adverse business cycle fluctuations. Consumers who are still in the early stage of paying off their houses have to decrease their consumption of other goods because of their committment to repay their debts on the house

Keywords: Business Cycles; Housing; Consumption; Real Business Cycles. (search for similar items in EconPapers)
JEL-codes: E3 E4 E5 (search for similar items in EconPapers)
Date: 2005-11-11

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Persistent link: http://EconPapers.repec.org/RePEc:sce:scecf5:372

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