Sticky House Price? (Slides)

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Barcelona GSE Master Project by Vorada Limjaroenrat

Master Program: Macroeconomic Policy and Financial Markets

About Barcelona GSE master programs: http://j.mp/MastersBarcelonaGSE

Published in: Economy & Finance
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Sticky House Price? (Slides)

  1. 1. Sticky House Price ? ? Vorada Limjaroenrat Barcelona Graduate School of Economics MSc. Macroeconomic Policy and Financial Markets
  2. 2. Outline • House price stickiness • Housing bubbles • Housing bubbles under different credit market conditions
  3. 3. Importance of House Price Stickiness(I) • Basrsky, House, and Kimball(2007) Sticky Nondurables Goods Flexible Durable Goods(Housing) Tightening Monetary Policy Nondurables Goods Production Durable Goods Production NEUTRAL EFECT
  4. 4. Importance of House Price Stickiness(II) • Bills and Klenow(2004) Durable goods have higher frequency of price adjustment than nondurables FULLY FLEXIBLE HOUSE PRICE is prevalently assumed in the NK model !! Is this the correct assumption?
  5. 5. Business Cycle Analysis
  6. 6. SVAR analysis Model of Gali and Gambetti(2014)
  7. 7. Monetary Policy Tightening (U.S.)
  8. 8. Related Literatures(I) House Price is Sticky Downward Case(1994) : if nominal price does not move to clear the market  Quantity clearing Leamer(2007) : house price has volume cycle not the price cycle  Crucial in explaining business cycle/recession Case(2003) : questionnaire survey of nearly two decades
  9. 9. Related Literatures(II) Source: Girouard, N., et al.(2006)
  10. 10. Related Literatures(III) Source: Girouard, N., et al.(2006)
  11. 11. “Housing Bubbles?”
  12. 12. Partial Equilibrium Model • Fundamental Component • Rational Asset Pricing • Both theory and evidence implies that < 0 • Dynamic response of asset price to monetary policy
  13. 13. 1st channel that interest rate affect bubbles • Bubble is growing with interest rate • Fundamental and Bubble component
  14. 14. 2nd channel that interest rate affect bubbles • Dynamic Response of Bubble component to interest rate shock
  15. 15. Rent Puzzle
  16. 16. Reconsider the Model…
  17. 17. Housing Stock Source: Gali and Gambetti(2013) Comparing Housing and Stock
  18. 18. Main Contributions of the paper • House Price is sticky • There is bubble component in house price • Real rent puzzle arises

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