Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70493
Authors: 
Fisher, Jonas Daniel Maurice
Gervais, Martin
Year of Publication: 
2007
Series/Report no.: 
Working Paper, Federal Reserve Bank of Chicago 2007-15
Abstract: 
Like other macroeconomic variables, residential investment has become much less volatile since the mid-1980s (recent experience notwithstanding.) This paper explores the role of structural change in this decline. Since the the early 1980s there have been many changes in the underlying structure of the economy, including those in the mortgage market which have made it easier to acquire a home. We examine how these changes affect residential investment volatility in a life-cycle model consistent with micro evidence on housing choices. We find that a decline in the rate of household formation, increased delay in marriage, and an increase in the cross-sectional variance of earnings drive the decline in volatility. Our findings provide support for the view that the Great Moderation in aggregate fluctuations is not just due to smaller aggregate shocks, but is driven at least in part by structural change.
Subjects: 
Business Cycles
Housing
Residential Investment
First-Time Home-Buyers
Great Moderation
JEL: 
E22
E32
J11
R21
Document Type: 
Working Paper

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