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Boom and Burst in Housing Market with Heterogeneous Agents (New Version)

Author

Listed:
  • Guido Ascari

    (Department of Economics and Management, University of Pavia)

  • Nicolò Pecora

    (Department of Economics and Social Sciences, Università Cattolica del Sacro Cuore)

  • Alessandro Spelta

    (Department of Economics and Management, University of Pavia)

Abstract

We study the housing market using a partial "dis"-equilibrium dynamic model in which the rational expectations hypothesis is relaxed in favor of chartist-fundamentalist mechanism to allows for the endogenous development of bubbles. Our model is able to replicate the recent house price dynamics in the US, with the preference shock being the main forcing variable. We also analyze the role of the interest rate policy. Our model supports the view that anchoring the interest rate to the change in house price would have reduced the volatility and the distortion in the price dynamics.

Suggested Citation

  • Guido Ascari & Nicolò Pecora & Alessandro Spelta, 2013. "Boom and Burst in Housing Market with Heterogeneous Agents (New Version)," DEM Working Papers Series 036, University of Pavia, Department of Economics and Management.
    • Handle: RePEc:pav:demwpp:036
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    File URL: http://dem-web.unipv.it/web/docs/dipeco/quad/ps/RePEc/pav/demwpp/DEMWP0036.pdf
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    Citations

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    Cited by:

    1. Yongheng Deng & Eric Girardin & Roselyne Joyeux, 2015. "Fundamentals and the Volatility of Real Estate Prices in China: A Sequential Modelling Strategy," Working Papers 222015, Hong Kong Institute for Monetary Research.
    2. Tan, Senren & Jin, Zhuo & Wu, Fuke, 2015. "Arbitrage and leverage strategies in bubbles under synchronization risks and noise-trader risks," Economic Modelling, Elsevier, vol. 49(C), pages 331-343.

    More about this item

    Keywords

    Heterogeneous agents; house price; agent-based model;
    All these keywords.

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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