Housing Investment: What Makes It so Volatile? Theory and Evidence from OECD Countries

Quoc Hung Nguyen

No 3, Working Papers from Development and Policies Research Center (DEPOCEN), Vietnam

Abstract: This paper explains how mortgage market liberalization can introduce greater volatility in the housing market, which is a stylized fact documented from OECD countries, with a DSGE model where households face a credit constraint and housing is used as collateral. The housing collateral constraint creates a link between the housing market and borrowing capacity, a link that ampli?es the response of housing demand to technology shocks and strengthens in economies with more liberalized mortgage markets. The calibrated model is able to explain about 90 percent of housing investment volatility in the UK.

Keywords: Housing Investment; Collateral Constraint; Mortgage Markets (search for similar items in EconPapers)
JEL-codes: E22 E32 F34 F41 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2012
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Journal Article: Housing investment: What makes it so volatile? Theory and evidence from OECD countries (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:dpc:wpaper:0312

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