The causes of the housing bubble are investigated using Granger causality analysis and VAR modeling methods. The study employs the S&P/Case-Shiller aggregate 10 city monthly housing price index, available in the period 1987-2010/8, the 20 city monthly housing price index for 2000-2010/8, and the...

Recently, convincing evidence has been presented that the recession in the wake of the recent financial crisis resulted primarily from an overly levered housing sector that was forced to deleverage and cut consumption spending when faced with collapsing housing prices. Following this...

We infer the role of price expectations in forming the U.S. housing boom in the early-2000s from examining housing inventories. We use a reduced form model to show that agents invest in vacant homes when they anticipate prices will increase. Empirically, vacancy can discriminate between price...

The US Federal Reserve cut interest rates more vigorously in the recent recession than the European Central Bank did. By comparison with the Fed, the ECB followed a more measured course of action. We use an estimated dynamic general equilibrium model with financial frictions to show that...