Housing Prices and the Business Cycle: An Empirical Application to Hong Kong

Michael Funke and Michael Paetz

Quantitative Macroeconomics Working Papers from Hamburg University, Department of Economics

Abstract: This paper develops a two-agent, two-sector, open-economy DSGE model with a housing-market sector and a borrowing constraint. Contrary to standard conventions, domestic households are allowed to invest in foreign housing and vice versa. Using Bayesian methods, the model is applied to data for Hong Kong. We identify strong and robust housing wealth effects, and show that property prices are mainly driven by intratemporal preference perturbations rather than by disturbances in financial frictions or price mark up shocks. These disturbances also explain a non-negligible part of the volatility of consumption, GDP and employment.

Keywords: DSGE models; housing; open economy; Hong Kong (search for similar items in EconPapers)
JEL-codes: D91 E21 E44 F41 (search for similar items in EconPapers)
Date: 2011-12
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Housing prices and the business cycle: An empirical application to Hong Kong (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ham:qmwops:21112b

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