Expectations-Driven Cycles in the Housing Market

Luisa Lambertini, Caterina Mendicino and Maria Teresa Punzi

MPRA Paper from University Library of Munich, Germany

Abstract: This paper analyzes housing market boom-bust cycles driven by changes in households' expectations. We explore the role of expectations not only on productivity but on several other shocks originated in the housing market, the credit market, the production sector and the conduct of monetary policy. We find that expectations related to different sectors of the economy can generate booms in the housing market in accordance with the empirical findings. However, only expectations of future expansionary monetary policy that are not fulfilled can also generate a macroeconomic recession. Regarding the credit market, increased access to credit generates boom-bust cycles only if it is expected to be reversed in the near future. Moreover, economies with higher access to credit are characterized by higher volatility of consumption and indebtedness but, not necessarily, of real GDP.

Keywords: Boom-Bust Cycles; Credit Frictions; Housing Market (search for similar items in EconPapers)
JEL-codes: E32 E44 E52 (search for similar items in EconPapers)
Date: 2010-10-22
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-ure
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Citations: View citations in EconPapers (11)

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https://mpra.ub.uni-muenchen.de/26128/1/MPRA_paper_26128.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/26254/1/MPRA_paper_26254.pdf revised version (application/pdf)

Related works:
Journal Article: Expectations-driven cycles in the housing market (2017)
Working Paper: Expectations-Driven Cycles in the Housing Market (2012)
Working Paper: Expectations-driven cycles in the housing market (2010)
Working Paper: Expectations-Driven Cycles in the Housing Market (2010)
Working Paper: Expectations-Driven Cycles in the Housing Market (2010)
Working Paper: Expectations-Driven Cycles in the Housing Market (2010)
Working Paper: Expectation-Driven Cycles in the Housing Market (2010)
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