Land-price dynamics and macroeconomic fluctuations

Zheng Liu, Pengfei Wang and Tao Zha

No 17045, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We argue that positive co-movements between land prices and business investment are a driving force behind the broad impact of land-price dynamics on the macroeconomy. We develop an economic mechanism that captures the co-movements by incorporating two key features into a DSGE model: We introduce land as a collateral asset in firms' credit constraints and we identify a shock that drives most of the observed fluctuations in land prices. Our estimates imply that these two features combine to generate an empirically important mechanism that amplifies and propagates macroeconomic fluctuations through the joint dynamics of land prices and business investment.

JEL-codes: E21 E27 E32 E44 (search for similar items in EconPapers)
Date: 2011-05
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
Note: EFG ME
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Citations: View citations in EconPapers (35)

Published as Zheng Liu & Pengfei Wang & Tao Zha, 2013. "LandâPrice Dynamics and Macroeconomic Fluctuations," Econometrica, Econometric Society, vol. 81(3), pages 1147-1184, 05.

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Related works:
Journal Article: Land‐Price Dynamics and Macroeconomic Fluctuations (2013)
Working Paper: Land-Price Dynamics and Macroeconomic Fluctuations (2012)
Working Paper: Land-price dynamics and macroeconomic fluctuations (2011)
Working Paper: Land-price dynamics and macroeconomic fluctuations (2011)
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