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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

Abstract: 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)
Date: 2014-08
New Economics Papers: this item is included in nep-bec, nep-dge, nep-mac and nep-ure
Note: AP EFG ME
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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) Downloads
Working Paper: Discount Shock, Price-Rent Dynamics, and the Business Cycle (2020) Downloads
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