EconPapers    
Economics at your fingertips  
 

Discount Shock, Price-Rent Dynamics, and the Business Cycle

Jianjun Miao (), Pengfei Wang () and Tao Zha ()

No 2020-7, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: The price-rent ratio in commercial real estate is highly volatile, and its variation comoves with the business cycle. To account for these two facts, we develop a dynamic general equilibrium model that explicitly introduces a rental market and incorporates the liquidity constraint on an individual firm's production as a key ingredient. Our estimation identifies the discount shock as the most important factor in driving price-rent dynamics and linking the dynamics in the real estate market to those in the real economy. We illustrate the importance of the liquidity premium and endogenous total factor productivity (TFP) in the nexus of the financial and real sectors.

Keywords: liquidity premium; heterogenous firms; endogenous TFP; stochastic discount factor; general equilibrium; asset pricing; comovements; production economy; bank loans; business cycles; debt (search for similar items in EconPapers)
JEL-codes: E22 E32 E44 (search for similar items in EconPapers)
Pages: 43
Date: 2020-05-21
New Economics Papers: this item is included in nep-bec, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://www.frbatlanta.org/-/media/documents/resea ... d-business-cycle.pdf Full Text (application/pdf)

Related works:
Journal Article: DISCOUNT SHOCK, PRICE–RENT DYNAMICS, AND THE BUSINESS CYCLE (2020) Downloads
Working Paper: Discount Shock, Price-Rent Dynamics, and the Business Cycle (2014) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedawp:88036

Ordering information: This working paper can be ordered from

DOI: 10.29338/wp2020-07

Access Statistics for this paper

More papers in FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2021-08-03
Handle: RePEc:fip:fedawp:88036