House Price, Mortgage Premium, and Business Fluctuations

Nan-Kuang Chen (), Han-Liang Cheng and Ching-Sheng Mao
Additional contact information
Han-Liang Cheng: Chung-Hua Institution for Economic Research
Ching-Sheng Mao: National Taiwan University

No 192011, Working Papers from Hong Kong Institute for Monetary Research

Abstract: This paper investigates the transmission mechanism of mortgage premium to characterize the relationship between the housing market and the business cycle for the U.S. economy. The model matches the main features of the U.S. housing market and business cycles well. The mortgage premium is crucial for the amplification and propagation of the model to match the data. If the Federal Reserve had exercised pre-emptive monetary policy in 2002Q1, the counterfactual analysis suggests that a higher interest rate would have stabilized house price and housing investment volatilities, but would have taken a big toll on real GDP: its volatility remains approximately the same, but the level of GDP contracts dramatically.

Keywords: Mortgage Premium; House Price; DSGE (search for similar items in EconPapers)
JEL-codes: E3 E4 E5 G1 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2011-06
New Economics Papers: this item is included in nep-bec, nep-cba, nep-dge, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: House price, mortgage premium, and business fluctuations (2012)
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