Housing market dynamics in a small open economy: Do external and news shocks matter?

Eric C.Y. Ng and Ning Feng

Journal of International Money and Finance, 2016, vol. 63, issue C, 64-88

Abstract: We study the sources of fluctuations in the housing market of a small open economy. We use an estimated dynamic stochastic general equilibrium (DSGE) model and data from seven small open economies to assess the quantitative effects of both contemporaneous and news shocks to domestic and external fundamentals on housing market dynamics. External shocks and news shocks have significant effects. Cyclical fluctuations in housing prices and housing investment are mainly driven by contemporaneous shocks related to foreign housing preferences and terms of trade, and by news shocks related to domestic consumption-goods technology, housing preferences and terms of trade. The spillover effects of external shocks on housing prices are notably larger than those of domestic shocks.

Keywords: Housing market dynamics; Housing price; Housing investment; Small open economy; External shocks; News shocks (search for similar items in EconPapers)
JEL-codes: E32 E44 F41 R31 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:63:y:2016:i:c:p:64-88

DOI: 10.1016/j.jimonfin.2016.01.005

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