Essays on House Prices and Consumption
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2011
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| Online Access: | http://rave.ohiolink.edu/etdc/view?acc_num=osu1306848116 |
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ndltd-OhioLink-oai-etd.ohiolink.edu-osu13068481162021-08-03T06:02:58Z Essays on House Prices and Consumption Song, In Ho Economics dynamic stochastic general equilibrium model the elasticity of intra-temporal substitution complementarity non-separability impulse response function co-integrating method DOLS efficient frontier lines <p>Micro data suggests that housing and consumption tend to move together and are classified as complements. However, most macroeconomic models rule out the possibility of complementarity between housing and consumption by adopting separable preferences, usually based on a log utility function. Along with complementarity, housing transaction costs are also crucial to the analysis of housing and consumption. Recognizing the importance of both complementarity and transaction costs, I develop a dynamic stochastic general equilibrium (DSGE) model that allows for realtor fees and nonseparable preferences over housing and consumption.</p><p>The assumption of complementarity is supported by an estimate of the elasticity of intratemporal substitution (EIS) using the National Income and Product Accounts (NIPA) data over the period 1970 Q1 to 2009 Q1. I estimate the EIS at 0.68; thus, housing and non-housing consumption are complements. This result is strong evidence against models that impose preferences characterized by additive separability.</p><p>Using my DSGE model, I investigate the consumption responses of heterogeneous households following changes in both house prices and interest rates. The model predicts that credit constrained households will be substantially more responsive to changes in both house prices and interest rates than unconstrained households. I confirm these predictions of my model using household data from the Consumer Expenditure Surveys.</p><p>I also investigate whether monetary policy responding to house prices improves the stability of inflation and output. Efficient frontier lines show that responding to house prices lowers the volatility of both inflation and output when the central bank values output stability. This result is consistent with a vector autoregression (VAR) analysis examining the interaction of the federal funds rate, house prices, inflation and output. Furthermore, using an extension of the Rudebusch and Svensson model, I find that there exists a house price effect in monetary policy. These results indicate that, to the extent that house prices affected output, monetary policy responded during the 1970 through 2007 period.</p> 2011-07-27 English text The Ohio State University / OhioLINK http://rave.ohiolink.edu/etdc/view?acc_num=osu1306848116 http://rave.ohiolink.edu/etdc/view?acc_num=osu1306848116 unrestricted This thesis or dissertation is protected by copyright: all rights reserved. It may not be copied or redistributed beyond the terms of applicable copyright laws. |
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NDLTD |
| language |
English |
| sources |
NDLTD |
| topic |
Economics dynamic stochastic general equilibrium model the elasticity of intra-temporal substitution complementarity non-separability impulse response function co-integrating method DOLS efficient frontier lines |
| spellingShingle |
Economics dynamic stochastic general equilibrium model the elasticity of intra-temporal substitution complementarity non-separability impulse response function co-integrating method DOLS efficient frontier lines Song, In Ho Essays on House Prices and Consumption |
| author |
Song, In Ho |
| author_facet |
Song, In Ho |
| author_sort |
Song, In Ho |
| title |
Essays on House Prices and Consumption |
| title_short |
Essays on House Prices and Consumption |
| title_full |
Essays on House Prices and Consumption |
| title_fullStr |
Essays on House Prices and Consumption |
| title_full_unstemmed |
Essays on House Prices and Consumption |
| title_sort |
essays on house prices and consumption |
| publisher |
The Ohio State University / OhioLINK |
| publishDate |
2011 |
| url |
http://rave.ohiolink.edu/etdc/view?acc_num=osu1306848116 |
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AT songinho essaysonhousepricesandconsumption |
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