Housing market dynamics and welfare
Berrak Büyükkarabacak and
Authors registered in the RePEc Author Service: Berrak BAHADIR and
Olena Staveley-O'Carroll ()
MPRA Paper from University Library of Munich, Germany
We augment a closed-economy DSGE model with collateral constraints tied to real estate values by incorporating the time-to-build phenomenon in the housing construction sector. Adding construction sector delays significantly improves business cycle properties of the model relative to the versions with no time-to-build delays or with permanently fixed housing stock. We also find that in the presence of construction lags adding housing prices to the central bank policy function increases aggregate welfare in the economy by up to 0.3 percent of consumption. This result is robust to several specifications of the Taylor rule and to changes in key parameter values.
Keywords: Housing prices; housing construction; time-to-build; welfare. (search for similar items in EconPapers)
JEL-codes: E32 E44 E52 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-mac and nep-ure
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