Productivity shocks and housing market inflations in new Keynesian models

Jun-Hyung Ko

MPRA Paper from University Library of Munich, Germany

Abstract: Econometric evidence suggests the existence of two dynamics in the postwar U.S. housing market: (i) housing rental and purchase prices co-move positively in response to productivity shocks, and (ii) the purchase price exhibits much larger volatile movements than the rental price in response to the shocks. A standard New Keynesian model with nominal rigidity in the production sector is inconsistent with these facts. We incorporate a rental market into an otherwise standard New Keynesian model with durables and show that nominal rigidity in the rental market contributes to our empirical findings.

Keywords: Productivity shock; price-rent ratio; housing prices (search for similar items in EconPapers)
JEL-codes: E31 E32 E37 R21 R31 (search for similar items in EconPapers)
Date: 2011-09
New Economics Papers: this item is included in nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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