A mechanism for booms and busts in housing prices

Arbeitspapier

We study an exchange economy with overlapping generations of consumers who derive utility from consuming a non-durable commodity and housing. A banking sector offers loans to finance housing. We provide a complete characterization of the equilibrium dynamics which alternates between an expansive regime where housing prices increase and banks expand loans and a contractive regime associated with decreasing housing values and shrinking credit volume. Regime switches occur even under small but persistent income changes giving rise to large and recurrent booms and busts in housing prices not reflecting changes in fundamentals.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: KIT Working Paper Series in Economics ; No. 40

Classification and Topics

• Classification: Wirtschaft ; Existence and Stability Conditions of Equilibrium ; Business Fluctuations; Cycles ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages
• Subject: OLG ; Housing prices ; Credit volume ; Boom-bust scenarios ; Regime switching ; Immobilienpreis ; Wohnimmobilien ; Kredit ; Immobilienfinanzierung ; Konjunktur ; Overlapping Generations ; Dynamisches Gleichgewicht ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hillebrand, Marten ; Kikuchi, Tomoo
• Event: Veröffentlichung
• (who): Karlsruher Institut für Technologie (KIT), Institut für Volkswirtschaftslehre (ECON)
• (where): Karlsruhe
• (when): 2012

Further information

• DOI: doi:10.5445/IR/1000028302
• Handle: http://hdl.handle.net/10419/58244
• URN: urn:nbn:de:swb:90-283023
• Last update: 10.03.2025, 11:43 AM CET