Discount Shock, Price-Rent Dynamics, and the Business Cycle
Jianjun Miao (),
Pengfei Wang () and
Tao Zha ()
No 20377, NBER Working Papers from National Bureau of Economic Research, Inc
The price-rent ratio is highly volatile and predicts future returns for commercial real estate. Price-rent variations in commercial real estate also tend to comove with investment and output. We develop a general equilibrium model that explicitly introduces a rental market and incorporates collateral constraints on production as a key ingredient. Our estimation identifies discount-rate shocks as the most important factor in (1) driving price-rent variations, (2) producing the long-horizon predictability of real estate returns, and (3) linking the dynamics in commercial real estate to those in the production sector.
JEL-codes: E22 E32 E44 (search for similar items in EconPapers)
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Published as Jianjun Miao & Pengfei Wang & Tao Zha, 2020. "DISCOUNT SHOCK, PRICE–RENT DYNAMICS, AND THE BUSINESS CYCLE," International Economic Review, vol 61(3), pages 1229-1252.
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Journal Article: DISCOUNT SHOCK, PRICE–RENT DYNAMICS, AND THE BUSINESS CYCLE (2020)
Working Paper: Discount Shock, Price-Rent Dynamics, and the Business Cycle (2020)
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