TY - JOUR
T1 - The macroeconomic effects of housing wealth, housing finance, and limited risk sharing in general equilibrium
AU - Favilukis, Jack
AU - Ludvigson, Sydney C.
AU - Van Nieuwerburgh, Stijn
N1 - Publisher Copyright:
© 2017 by The University of Chicago. All rights reserved.
PY - 2017/2
Y1 - 2017/2
N2 - This paper studies a quantitative general equilibrium model of housing. The model has two key elements not previously considered in existing quantitative macro studies of housing finance: aggregate business cycle risk and a realistic wealth distribution driven in the model by bequest heterogeneity in preferences. These features of the model play a crucial role in the following results. First, a relaxation of financing constraints leads to a large boomin house prices. Second, the boom in house prices is entirely the result of a decline in the housing risk premium. Third, low interest rates cannot explain high home values.
AB - This paper studies a quantitative general equilibrium model of housing. The model has two key elements not previously considered in existing quantitative macro studies of housing finance: aggregate business cycle risk and a realistic wealth distribution driven in the model by bequest heterogeneity in preferences. These features of the model play a crucial role in the following results. First, a relaxation of financing constraints leads to a large boomin house prices. Second, the boom in house prices is entirely the result of a decline in the housing risk premium. Third, low interest rates cannot explain high home values.
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U2 - 10.1086/689606
DO - 10.1086/689606
M3 - Article
AN - SCOPUS:85009963966
SN - 0022-3808
VL - 125
SP - 140
EP - 223
JO - Journal of Political Economy
JF - Journal of Political Economy
IS - 1
ER -