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The cyclical behavior of the Beveridge Curve in the housing market

Miroslav Gabrovski () and Victor Ortego-Marti ()

Journal of Economic Theory, 2019, vol. 181, issue C, 361-381

Abstract: This paper develops a business cycle model of the housing market with search frictions and entry of both buyers and sellers. The housing market exhibits a well-established cyclical component, which features three stylized facts: prices move in the same direction as sales and the number of houses for sale, but opposite to the time it takes to sell a house. These stylized facts imply that in the data housing vacancies and the number of buyers are positively correlated, i.e. that the Beveridge Curve is upward sloping. A baseline search and matching model of the housing market is unable to match these stylized facts because it inherently generates a downward sloping Beveridge Curve. With free entry of both buyers and sellers, our model reproduces the positive correlation between prices, sales and vacancies, and matches the stylized facts qualitatively and quantitatively.

Keywords: Housing market; Business cycles; Search and matching; Beveridge Curve (search for similar items in EconPapers)
JEL-codes: E2 E32 R21 R31 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:181:y:2019:i:c:p:361-381

DOI: 10.1016/j.jet.2019.03.003

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