Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70702
Authors: 
Liu, Zheng
Wang, Pengfei
Zha, Tao
Year of Publication: 
2011
Series/Report no.: 
Working Paper, Federal Reserve Bank of Atlanta 2011-11
Abstract: 
We argue that positive comovements between land prices and business investment are a driving force behind the broad impact of land-price dynamics on the macroeconomy. We develop an economic mechanism that captures the comovements by incorporating two key features into a DSGE model: we introduce land as a collateral asset in firms' credit constraints, and we identify a shock that drives most of the observed fluctuations in land prices. Our estimates imply that these two features combine to generate an empirically important mechanism that amplifies and propagates macroeconomic fluctuations through the joint dynamics of land prices and business investment.
Subjects: 
land prices
collateral assets
investment
dynamic multiplier
propagation mechanism
co-movements
JEL: 
E21
E27
E32
E44
Document Type: 
Working Paper

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