Can learning explain boom-bust cycles in asset prices? An application to the US housing boom
Colin Caines ()
Journal of Macroeconomics, 2020, vol. 66, issue C
This paper argues that boom-bust behavior in asset prices can be explained by a model in which boundedly rational agents learn the process for prices. The novel feature of the model is that learning operates in both the demand for assets and the supply of credit. Interactions between agents on either side of the market create complementarities in their respective beliefs, yielding strong internal propagation. The model is applied to US housing markets. Quantitative exercises explain the recent boom-bust in US house prices from observed fundamentals whilst replicating key moments of housing market variables at business cycle frequencies.
Keywords: Learning; Non-rational expectations; House price boom-bust (search for similar items in EconPapers)
JEL-codes: E30 E17 D83 G12 R30 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: Can Learning Explain Boom-Bust Cycles in Asset Prices? An Application to the US Housing Boom (2017)
Working Paper: Can Learning Explain Boom-Bust Cycles In Asset Prices? An Application to the US Housing Boom (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:66:y:2020:i:c:s0164070420301816
Access Statistics for this article
Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos
More articles in Journal of Macroeconomics from Elsevier
Bibliographic data for series maintained by Nithya Sathishkumar ().