Document Type

Journal Article

Department/Unit

Department of Economics

Title

Housing market dynamics in a small open economy: Do external and news shocks matter?

Language

English

Abstract

We study the sources of fluctuations in the housing market of a small open economy. We use an estimated dynamic stochastic general equilibrium (DSGE) model and data from seven small open economies to assess the quantitative effects of both contemporaneous and news shocks to domestic and external fundamentals on housing market dynamics. External shocks and news shocks have significant effects. Cyclical fluctuations in housing prices and housing investment are mainly driven by contemporaneous shocks related to foreign housing preferences and terms of trade, and by news shocks related to domestic consumption-goods technology, housing preferences and terms of trade. The spillover effects of external shocks on housing prices are notably larger than those of domestic shocks.

Keywords

E32, E44, External shocks, F41, Housing investment, Housing market dynamics, Housing price, News shocks, R31, Small open economy

Publication Date

1-5-2016

Source Publication Title

Journal of International Money and Finance

Volume

63

Start Page

64

End Page

88

Publisher

Elsevier

Peer Reviewed

1

DOI

10.1016/j.jimonfin.2016.01.005

ISSN (print)

02615606

ISSN (electronic)

18730639

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