Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/212099 
Year of Publication: 
2008
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 8/2008
Publisher: 
Bank of Finland, Helsinki
Abstract: 
We study how a household borrowing constraint the the form of a down payment requirement affects house price dynamics in an OLG model with standard preferences. We find that in certain situations the borrowing constraint shapes house price dynamics substantially. The importance of the constraint depends very much on whether house price changes are driven by interest rate or aggregate income shocks. Moreover, because of the borrowing constraint, house price dynamics display substantial asymmetries between large positive and large negative income shocks. These results are related to the fact that the share of borrowing-constrained households is different following different shocks.
Subjects: 
house prices
dynamics
borrowing constraints
down payment constraint
JEL: 
E21
R21
Persistent Identifier of the first edition: 
ISBN: 
978-952-462-433-6
Document Type: 
Working Paper

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