Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/72693
Authors: 
Dorofeenko, Viktor
Lee, Gabriel S.
Salyer, Kevin D.
Year of Publication: 
2010
Series/Report no.: 
Reihe Ökonomie / Economics Series, Institut für Höhere Studien (IHS) 249
Abstract: 
This paper analyzes the role of uncertainty in a multi-sector housing model with financial frictions. We include time varying uncertainty (i.e. risk shocks) in the technology shocks that affect housing production. The analysis demonstrates that risk shocks to the housing production sector are a quantitatively important impulse mechanism for the business cycle. Also, we demonstrate that bankruptcy costs act as an endogenous markup factor in housing prices; as a consequence, the volatility of housing prices is greater than that of output, as observed in the data. The model can also account for the observed countercyclical behavior of risk premia on loans to the housing sector.
Subjects: 
agency costs
credit channel
time-varying uncertainty
residential investment
housing production
calibration
JEL: 
E4
E5
E2
R2
R3
Document Type: 
Working Paper

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