House-Price Crash and Macroeconomic Crisis: A Hong Kong Case Study

Tongbin Zhang and Bo Hu

MPRA Paper from University Library of Munich, Germany

Abstract: House prices crash has become an important feature of macroeconomic crisis. We argue that house prices crash driven by contractionary monetary policy is not only a reaction to crisis, but also accelerates and amplifies the fluctuations of major macroeconomic variable. In this paper, we conduct a case study of Hong Kong in the 1997-1998 financial crisis and quantitatively analyze the mechanism by developing a general equilibrium model incorporating financial accelerator mechanism into both household and entrepreneur sectors. After estimating and simulating the model, impulse response results imply that our model can explain the co-movement of house prices, consumption, and investment better than the alternative models.

Keywords: house prices; fianncial accelerator; consumption; investment; Hong Kong (search for similar items in EconPapers)
JEL-codes: E32 E37 E44 (search for similar items in EconPapers)
Date: 2011-11-22
New Economics Papers: this item is included in nep-mac and nep-ure
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:34962

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