Asset pricing and housing supply in a production economy

Ivan Jaccard

No 1454, Working Paper Series from European Central Bank

Abstract: We develop a representative agent model of a production economy in order to explain the joint dynamics of house prices and equity returns. In a model generating costly business cycle fluctuations, we find that restrictions on housing supply have important implications for asset pricing. Together with habit formation in the composite of consumption and leisure, building restrictions provide an explanation for the high volatility of house prices and contribute to the resolution of asset pricing puzzles. JEL Classification: E2, E3, G1

Keywords: adjustment costs; cost of business cycle; house prices; housing returns (search for similar items in EconPapers)
Date: 2012-07
New Economics Papers: this item is included in nep-dge and nep-ure
Note: 737337
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Asset Pricing and Housing Supply in a Production Economy (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20121454

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