A Note on Learning, House Prices, and Macro-Financial Linkages

Pauline Gandré

Macroeconomic Dynamics, 2023, vol. 27, issue 7, 1996-2011

Abstract: In the USA, the linkages between the housing market, the credit market, and the real sector have been striking in the past decades. To explain these linkages, I develop a small-scale dynamic stochastic general equilibrium (DSGE) model in which agents update non-rational beliefs about future house price growth, in accord with recent survey data evidence. Both standard productivity shocks and shocks in the credit sector generate endogenously persistent booms in house prices. Long-lasting excess volatility in house prices, in turn, affects the financial sector and propagates to the real sector. This amplification and propagation mechanism improves the ability of the model to explain empirical puzzles in the US housing market and to explain the macro-financial linkages during 1985−2019. The learning model can also replicate the predictability of forecast errors evidenced in recent survey data.

Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
Working Paper: A Note on Learning, House Prices and Macro-Financial Linkages (2022)
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: https://EconPapers.repec.org/RePEc:cup:macdyn:v:27:y:2023:i:7:p:1996-2011_8

Access Statistics for this article

More articles in Macroeconomic Dynamics from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().