Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5099668 | Journal of Economic Dynamics and Control | 2009 | 17 Pages |
Abstract
This paper analyzes the roles of credit market conditions in endogenous formation of housing-market boom-bust cycles in a business cycle model. When households are uncertain about the duration of a temporary high income growth period, expected future house prices rise during the high growth period and fall at the end of the period. But this development causes expectation-driven boom-bust cycles in current house prices only if the economy is open to international capital flows. It is also shown that high maximum loan-to-value ratios for residential mortgages per se do not cause boom-bust cycles without international capital flows in the model.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Hajime Tomura,