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We investigate the behavior of the equilibrium price-rent ratio for housing in a standard asset pricing model. We allow for time-varying risk aversion (via external habit formation) and time-varying persistence and volatility in the stochastic process for rent growth, consistent with U.S. data...
Persistent link: https://www.econbiz.de/10010628453
We use a simple quantitative asset pricing model to “reverse-engineer” the sequences of stochastic shocks to housing demand and lending standards that are needed to exactly replicate the boom-bust patterns in U.S. household real estate value and mortgage debt over the period 1995 to 2012....
Persistent link: https://www.econbiz.de/10011152610
Progress on the question of whether policymakers should respond directly to financial variables requires a realistic economic model that captures the links between asset prices, credit expansion, and real economic activity. Standard DSGE models with fully-rational expectations have difficulty...
Persistent link: https://www.econbiz.de/10010567340