Housing Market Dynamics: Any News?

Sandra Gomes and Caterina Mendicino

No 2012/23, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: This paper quantifies the importance of news shocks for housing market fluctuations. To this purpose, we extend Iacoviello and Neri (2010)'s model of the housing market to include news shocks and estimate it using Bayesian methods and U.S. data. We find that news shocks: (1) account for a sizable fraction of the variability in house prices and other macroeconomic variables over the business cycle and (2) significantly contributed to booms and busts episodes in house prices over the last three decades. By linking news shocks to agents' expectations, we find that house price growth was positively related to inflation expectations during the boom of the late 1970's while it was negatively related to interest rate expectations during the housing boom that peaked in the mid-2000's. JEL Classification: C50, E32, E44.

Keywords: bayesian estimation; news shocks; local identification; housing market; financial frictions; inflation and interest rate expectations. (search for similar items in EconPapers)
Date: 2012-07
New Economics Papers: this item is included in nep-dge, nep-mac and nep-ure
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Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Housing market dynamics: Any news? (2015)
Working Paper: Housing Market Dynamics: Any News? (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ise:isegwp:wp232012

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