Land-price dynamics and macroeconomic fluctuations
Zheng Liu,Pengfei Wang,Tao Zha +2 more
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In this paper, the authors argue that positive co-movements between land prices and business investment are a driving force behind the broad impact of land-price dynamics on the macroeconomy.Abstract:
We argue that positive co-movements between land prices and business investment are a driving force behind the broad impact of land-price dynamics on the macroeconomy. We develop an economic mechanism that captures the co-movements by incorporating two key features into a DSGE model: We introduce land as a collateral asset in firms' credit constraints, and we identify a shock that drives most of the observed fluctuations in land prices. Our estimates imply that these two features combine to generate an empirically important mechanism that amplifies and propagates macroeconomic fluctuations through the joint dynamics of land prices and business investment.read more
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References
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Journal ArticleDOI
Shocks and frictions in US business cycles: A Bayesian DSGE approach
Frank Smets,Rafael Wouters +1 more
TL;DR: In this paper, a dynamic stochastic general equilibrium (DSGE) model for the US economy is proposed, which incorporates many types of real and nominal frictions: sticky nominal price and wage setting, habit formation in consumption, investment adjustment costs, variable capital utilisation and fixed costs in production.
Journal ArticleDOI
Deciphering the Liquidity and Credit Crunch 2007-2008
TL;DR: The financial market turmoil in 2007 and 2008 has led to the most severe financial crisis since the Great Depression and threatens to have large repercussions on the real economy as mentioned in this paper The bursting of the housing bubble forced banks to write down several hundred billion dollars in bad loans caused by mortgage delinquencies at the same time the stock market capitalization of the major banks declined by more than twice as much.
Journal ArticleDOI
House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle
TL;DR: This paper developed a general equilibrium model with sticky prices, credit constraints, nominal loans and asset prices, and found that monetary policy should not target asset prices as a means of reducing output and inflation volatility.
ReportDOI
The Financial Accelerator in a Quantitative Business Cycle Framework
TL;DR: This paper developed a dynamic general equilibrium model that is intended to help clarify the role of credit market frictions in business fluctuations, from both a qualitative and a quantitative standpoint, in particular, the framework exhibits a "financial accelerator", in that endogenous developments in credit markets work to amplify and propagate shocks to the macroeconomy.
Book ChapterDOI
Financial Intermediation and Credit Policy in Business Cycle Analysis
Mark Gertler,Nobuhiro Kiyotaki +1 more
TL;DR: The authors developed a canonical framework to think about credit market frictions and aggregate economic activity in the context of the current crisis, and used the framework to address two issues in particular: first, how disruptions in financial intermediation can induce a crisis that affects real activity; and second, how various credit market interventions by the central bank and the Treasury of the type we have seen recently, might work to mitigate the crisis.
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