This paper develops a DSGE model with housing, risky mortgages and endogenous default. Housing investment is subject to idiosyncratic risk and some mortgages are defaulted in equilibrium. An unanticipated increase in the standard deviation of housing investment produces a credit crunch where...

Can a DSGE model replicate the financial crisis effects without assuming unprecedented and implausibly large shocks? Starting from the assumption that the subprime crisis triggered the financial crisis, we introduce balance-sheet effects for housing market borrowers and for commercial banks in...

The paper analyses the effectiveness of fiscal tools at the zero lower bound (ZLB). A non-linear New Keynesian DSGE model with occasionally binding constraints on monetary policy and borrowing is applied. When the ZLB binds in a liquidity trap, government spending becomes more effective in...

This paper investigates a role of supply chain network in transmitting housing market disruptions during the Great Recession. We build up a unique micro-level data that combines local housing market condition, firms' sales in each local market, and firm-level supply chain network information....

This paper studies the effects of imperfect risk-sharing between lenders and borrowers on commercial property prices and leverage. The key friction is that agents use different discount rates to evaluate future flows. Eliminating this pecuniary externality generates large reductions in the...

In this paper, I investigate the characteristics of house price dynamics for a sample of 16 emerging economies from Asia and Central and Eastern Europe, over the period 1995-2011. Linking housing valuations to a set of conventional fundamental determinants – relative to both the supply and the...

While analysing the housing market, we focus on the short-term modelling of the housing units market instead of analysing the long-term housing space market. In this context, even a minor change in factors affecting the real estate market leads, due to the multiplier effect, to strong shocks on...

Asset bubbles come and go. Only the housing bubble, however, brought the economy to its knees. Why? What makes housing uniquely a cause of macroeconomic risk? This article examines the workings of the housing market as well as theories and empirical evidence about the housing bubble. It explains...

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....

Using Bayesian methods, we estimate a nonlinear general equilibrium model where occasionally binding collateral constraints on housing wealth drive an asymmetry in the link between housing prices and economic activity. The estimated model shows that, as collateral constraints became slack during...