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Housing and the Business Cycle Revisited

Daniel Fehrle ()

No 178, Working Papers from Bavarian Graduate Program in Economics (BGPE)

Abstract: In this paper, I present a multi-sectoral DSGE-model with housing, real rigidities and variable capital utilization that generates aggregate and sectoral co-movements due to sector specic shocks. Furthermore, the model accounts for two puzzles: First, residential investment correlates positively with house prices, and second, GDP residential and business investment tend toward the empirically observed lead-lag pattern. I show that, except for relative prices, all co-movements and the lead-lag pattern of different investment types are endogenous in the calibrated model and independent of the properties of the shock. In a second step, I estimate the these properties with Bayesian techniques. As it turns out, shocks to sectors with similar elasticities in the nal good sectors playa role related to aggregated shocks. In contradiction to a standard assumption in the literature, shocks to the construction sector seem to be lower than others.

Keywords: Housing market; sectoral and aggregate co-movements (search for similar items in EconPapers)
JEL-codes: E13 E32 O41 R31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-mac and nep-ure
Date: 2018-05
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Downloads: (external link) First version, 2018 (application/pdf)

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Journal Article: Housing and the business cycle revisited (2019) Downloads
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