Regulating Speculative Housing Markets via Public Housing Construction Programs: Insights from a Heterogeneous Agent Model

Martin Carolin () and Frank Westerhoff
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Martin Carolin: University of Bamberg, Feldkirchenstr. 21, 96047Bamberg, Germany

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), 2019, vol. 239, issue 4, 627-660

Abstract: Since the instability of housing markets may be quite harmful for the real economy, we explore whether public housing construction programs may tame housing market fluctuations. As a workhorse, we use a behavioral stock-flow housing market model in which the complex interplay between speculative and real forces triggers reasonable housing market dynamics. Simulations reveal that plausible and well-intended policy measures may turn out to be a mixed blessing. While public housing construction programs may reduce house prices, they seem to be incapable of bringing house prices much closer towards their fundamental values. In addition, these programs tend to drive out private housing constructions.

Keywords: housing markets; boom-bust dynamics; extrapolative and regressive expectations; heterogeneous agent models; policy experiments; public housing construction programs (search for similar items in EconPapers)
JEL-codes: D84 R21 R31 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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Working Paper: Regulating speculative housing markets via public housing construction programs: Insights from a heterogeneous agent model (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:jns:jbstat:v:239:y:2019:i:4:p:627-660:n:3

DOI: 10.1515/jbnst-2018-0042

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