Macroeconomics and Housing: A Review of the ♠ Literature

Charles Leung♥ Chinese University of Hong Kong
First Draft: August 2003 This version: September, 2004

Acknowledgement: This is prepared for the “Housing market and the Macro Economy: the nexus” workshop, Hong Kong, August 2003. The author thanks Stanley Engerman, Nobuhiro Kiyotaki, an anonymous referee, Robert Edelstein, and seminar participants for many useful suggestions. Edelstein in particular offers an usual amount of help which significantly improves the paper. Eric Hanushek generously assisted the author to gain access to documents at Stanford University. Youngman Leong has provided excellent research assistance. The financial support from RGC Earmark grant and Chinese University of Hong Kong Direct Grant are gratefully acknowledged. The usual disclaimer applies.



In his encyclopedic collection of writings about Origins of Macroeconomics, Robert Dimand includes a set of important contributions to macroeconomics, by many of the most eminent contributors (in alphabetical order): W. H. Beveridge, Milton Friedman, Roy Harrod, J. R. Hicks, John M. Keynes, Frank Knight, Tjalling Koopmans, Simon Kuznets, Alfred Marshall, Karl Marx, Lloyd Metzler, Ludwig von Mises, Franco Modigliani, Bertil Ohlin, A. C. Pigou, Frank Ramsey, Paul Samuelson, Joseph Schempeter, Jan Tinbergen, James Tobin, and Allyn Young. Only one article therein is related to the housing market, which is the debt deflation-paper by Irving Fisher (1933). This compendium is not an exception but rather a reflection of the apparent disconnect between macroeconomics and housing research. Among the 40 papers selected for Landmark Papers in Economic Fluctuations, Economic Policy and Related Subjects (edited by Nobel Prize Winner Lawrence Klein), the only paper focusing on the housing market is “The Relation of Home Investment to Unemployment” by R. F. Kahn. Among the 11 papers contained in Landmark Papers in Economic Growth, (edited by Nobel Prize Winner Robert Solow), and the 32 papers in Landmark Papers in Macroeconomics, (edited by Nobel Prize Winner James Tobin), none is dealing directly with

the housing market.1 Standard macroeconomics textbooks either treat housing as one of many consumption goods, or neglect it all together. “Mainstream macroeconomics,” simply put, ignores the housing market. Conventional housing economics and urban economics research for its part virtually ignores interactions with the macroeconomy. At best, some of the theoretical and empirical analyses for urban and housing economics include macroeconomic variables (such as the inflation, the economic growth, GDP, the unemployment rate, etc.) as exogenous “control variables.” For instance, in the 4 volumes of Handbook of Regional and Urban Economics,2 the papers by Charles Becker and Andrew Morrison on “Urbanization in Transforming Economies” and Stephen Malpezzi on “Economic Analysis of Housing Markets in Developing and Transition Economies” attempt to relate the interaction between the macroeconomy and the housing markets.3 The adjacent field, Finance, borders on both macroeconomy and real estate housing in a much more responsive fashion. In Handbook of the Economics of Finance, Vols 1A-B, edited by G. Constantinides, M. Harris and R. Stulz, there are at least two macro oriented papers, “ConsumptionTobin includes several papers related to portfolio choices under uncertainty, and housing is arguably one of many different assets to hold. 2 Volume 1 is edited by Peter Nijkamp, Volume 2 is edited by Edwin Mills, Volume 3 is jointly edited by Paul Cheshire and Edwin Mills and Volume 4 is jointly edited by V. Henderson and J. F. Thisse. 3 There is a literature on whether real estate and/or real estate securities can be a hedge of inflation. However, it is mainly related to the portfolio choice rather than housing market behavior itself.


based asset pricing” by John Campbell and “The Equity Premium in Retrospect” by Rajinish Mehra and Edward Prescott. In addition, there are several chapters which take “macroeconomic” seriously.4 In light of this comparison with finance, it is indeed shocking that there has been so little overlap and interaction between the macroeconomics and the housing literatures. More recently, however, there is a small yet growing research effort that strives to bridge the gap between the two literatures and shed light on issues that are jointly consequential to macro and housing economists. This paper will review selectively and highlight the new directions of this joint research. This paper is organized into six subsequent sub-sections. The next section will provide underlying motivations for the “macro-housing” literature. It will be followed by a discussion about the important ways in which macroeconomics and housing economics overlap, with a brief summary of the existing research. Section 3 will examine the interplay of
They include the chapters on “Financial intermediation” by Gary Gorton and Andrew Winton, “Intertemporal asset pricing theory” by Darrell Duffie, “Tests of multi-factor models, volatility, and portfolio performance” by Wayne Ferson, “Are financial assets priced locally or globally?” by G. A. Karolyi and Rene Stulz, “Finance, optimization, and the irreducibly irrational component of human behavior,” by Robert Shiller, “Fixed income pricing” by Qiang Dai and Ken Singleton, among others. 5 According to Chetty and Szeidl (2004), the mean expenditure share for shelter (i.e. housing) is about 20%, household income, supplies and furniture is about 6%, transport (including gas and maintenance) is 16%, food and apparel each is 15%, utilities, fuels, and public services is 7%, health care is 6%, the rest are for education, entertainment, and miscellaneous items.


The focal point of section 6 will be the micro-structure of housing markets and urban form.5 Greenwood and Hercowitz (1991) find that the value of the residential capital stock is larger than than that for business capital. and should be the scope of macro-housing research? These are fundamental issues that deserve a response. and vice versa? What is.economy. 2. housing is not just “another” consumption good.he plain response is housing is a large share of the overall macro. and thus potentially significant household 6 See also Skinner (1994). Why Macro-housing? How are the housing market and the macroeconomy intertwined? Is it important to include the housing market in macroeconomic analysis. and usually. Sections 4 and 5 will discuss the vibrant sub-fields of housing markets dynamics and cycles. Significant fluctuations in housing price would imply significant fluctuations in wealth. To illustrate the significance of the housing market in the macroeconomy. 5 . the annual market value of residential investment is larger than that for business capital investment.6 Clearly. here are stylized facts.housing taxation with the macroeconomy. The last section will conclude. Housing constitutes a significant share of household expenditure as well as total wealth.

S.1 Differential tax treatment on housing For instance. M/(PY) is equal to the reciprocal of the velocity of money. 1996b). the ratio of nominal monetary stock to the nominal GDP. There is a large diverse literature related to the housing and taxation. Many of these papers have been previously surveyed. 3.wealth effects. Even this branch of the literature is voluminous. 8 7 6 .8 3. including an explicit consideration of the government budget and the general equilibrium effects. See Cheung (2003). 9 See the Handbook of Public Economics series. the value of real balance for M1 and M2 in the U. Auerbach and M.9 We will restrict our attention to those research treaties which examine the aggregate effects of taxation and the housing market.S. are about 30% and 60% of the GDP. As a comparison. 1/V. Campbell and Cocco (2004). Quigley and Shiller (2001). Feldstein. edited by A. respectively. Case. and the discussion is therefore selectively developed. Notice that according to the quantity theory of money. residential property stock is approximately equal to the annual average GDP. see Skinner (1989. Housing and Taxation It is easy to anticipate that property taxation of housing can be an important component of governmental budgets because of its immobility and magnitude.7 Davis and Heathcote (2001) find that the market value of the U.

11 See Hamilton and Whalley (1985).14 More recent property tax research borrows sophisticated 10 See Ljungqvist and Sargent (2000) for an explanation why durable and immobile capital is more vulnerable to taxation. Goulder and Summers (1989).11 DiMasi (1987) solves a computable.12 Fullerton and Henderson (1989) also show that general equilibrium taxation induced distortions among industries are smaller than those across assets. Hendershott and Won (1992). and finds that eliminating the differential tax treatment on capital and land can lead to a significant social welfare gain. 1983) study how differential tax treatment on residential housing and business capital affects the equilibrium allocation of capital and investment returns. 14 For instance.10 Yet. the tax system seems to favor house ownership Hendershott and Hu (1981. in the United States. 12 For instance.13 Other general equilibrium models find that tax policies which favor the housing sector will cause a significantly negative impact on both the aggregate income and the housing sector.6% increase in tax revenue. as the policy distorts the accumulation of physical capital which is essential for goods production and economic growth. in one of the parameterization. Skinner (1996a). a view clearly not shared by others. 7 . 13 Yet they find that even the latter is below one percent of income. this change can lead to 6. spatial general equilibrium model.There are at least two predominant reasons why housing is taxed. it is difficult to avoid taxation of housing because of its durability and immobility. Second. First. the market value of housing stock is significant. see Goulder (1989). as in many countries. Cooley and Salyer (1987) for related analysis.

tax system. If the preferential tax treatment on housing is undesirable. Turnovsky and Okuyama (1994). that is. Future research should 15 Among others.analytical devices from the macroeconomics tool kit.17 Differential tax treatment on housing may be a tool to “internalize” the externality. Leung (1999). He concludes that the preferential tax treatment for residential property leads to a net welfare loss. There may be some positive externality of house ownership. 16 The literature on time-consistent policy is too large to be reviewed here. 8 . 17 For instance. then. why has it been implemented? There are some obvious candidate explanations. housing may be a politically expedient tax target.16 Hansson and Stuart (1989) demonstrate such a time-inconsistency by showing that under certain conditions. of the current housing taxation research is focused on the U. if not all. Most.Casual observation suggests that the preferential tax treatment for housing exists in other countries. calibrated for both the aggregate statistics and the income distribution of the U. First.S. In a similar fashion. short term elected democratic governments may not be able to commit to long term policy. Interested readers may consult Ljungqvist and Sargent (2000) for a textbook treatment. see Glaeser and Sacerdote (2000). Lin and Zhang (1998). multiperiod overlapping-generation model. house ownership has significant social benefit. while taxing the capital stock. government would subsidize investment flows.15 Gervais (2002) develops preferential tax treatment in a dynamic general equilibrium. see Nielsen and Sorensen (1994).S.

in the U.K. 4. or the political system? Can different treatments be Pareto ranked? Currently.S. We will examine both 9 . Ortalo-Magne and Rady (1998) find that. It would be interesting to explain these movements in the housing market. which is in turn more volatile than GDP. the standard deviation of residential investment is more than twice that of non-residential counterpart. are the difference related to some economic indicators.address differences in the preferential tax treatment across countries? If so. such as the demographic structure. financial development. and U. the degree of economic development..S. although all three variables are correlated. the literature lacks both empirical and theoretical research about the effects of international differences of property taxation upon the macroeconomy. Davis and Heathcote (2001) show that.. Housing and business cycles The housing market endures significant cyclical movements and volatility. the number of housing market transactions is more volatile than the aggregate housing price. For example. for the U. and to what extent they are related to macroeconomic movement in business cycles.

whereas the non-residential investment lags the cycle. Jud and Winkler (2002) conclude that real housing price appreciation is strongly influenced by the growth of population and real changes in income. a change in government purchases has little. see Baffoe-Bonnie (1998). Wen (2001) for the case of U. Seko (2003) for the case of Japan.K.18 4.. In a model with 18 See Cooley (1995). The comovement of the housing market and the macroeconomy has been documented for several countries.1 Quantity Comovement An important portion of housing market movements is related to the business cycles. Davis and Heathcote (2001) find that.20 However. Ito (1993).S. 19 For instance. the residential investment leads the cycle (or GDP). if any. in the U. without a residential housing stock. For instance.S.. 20 See also Case (2000). effect on the capital stock adjustment in a small open economy model. it is not a trivial task to create a unifying theory of the business and the housing cycles. especially chapter 1. for a detailed discussion of why the quantitative implications of a theory are as important as the qualitative counterpart.. 10 . Bowen (1994) for the case of U.qualitative and quantitative aspects of the housing-business cycle relationship. The macroeconomy and the housing market are indeed interrelated and co-determined. the dynamics of residential investment are fundamentally different from the non-residential counterpart. Green (1997). As shown by Matsuyama (1990). construction costs and interest rates. See also Hwang and Quigley (2004).19 For city level data.

and so forth.23 21 For related analysis. since housing is a normal good. the productivity shock to home production cannot be measured even in principle. see also Benhabib. Rogerson and Wright (1991). 22 A typical story is that both home production and market production sectors can take advantage of the modern microwave oven in the cooking process.” 11 .S.21 They assume reversibility between residential and business capital. The productivity shocks to home production (such as home cooking.22 These assumptions enable Greenwood and Hercowitz to reproduce the co-movement of business and residential investment in the macro model. the stock accumulation will be affected by a change in government purchases. They intentionally suppress the “price dynamics” in order to focus on the “quantity dynamics”. who focus on the allocation of market versus non-market time. Thus. and neither priced nor recorded. Greenwood and Hercowitz (1991) and Baxter (1996) build a set of dynamic general equilibrium models to reproduce jointly the business and the residential investment cycles observed in the U. It follows that the theory cannot be easily “tested.residential property. which implies that the relative price of housing will always be unity. which is not traded in the market) and market production (such as food served in the restaurant) are assumed to be the same (or highly correlated). To overcome this difficulty. while Greenwood and Hercowitz (1991) focus on the allocation of market versus non-market capital. The crucial assumption that the productivity shock in both the market and home sectors is highly correlated cannot be easily tested. 23 “Output” of home production is not traded in the market. and washing machines with “micro-computers” installed in the laundry process.

and if consumer durables and time are substitutes in home production. 25 It is well known that the supply of housing adjusts slowly to price changes. thereby creating an observed comovement. see Hanushek and Quigley (1979. Fisher (2001) observes that the effectiveness of 24 In other words. The existence of convex adjustment cost encourages agents to “spread” the accumulation between business and residential investment. an increase in residential investment during the current period will release more labor hours for goods production in subsequent time periods resulting in a higher level of business investment in the current period. business and residential investment both increase. 1980). Chang (2000) shows that if there is an adjustment cost in capital accumulation. both effects reinforce each other and lead to the investment comovement. Thus. or simply buying a big home. from human capital accumulation to market goods and home production. Fisher (1997) explains residential and nonresidential investment comovement by assuming complementarity between the household and business capital in goods production. In an endogenous growth framework. For instance. 12 . Consequently.24 then the business and residential investment will co-move in the equilibrium. Einarsson and Marquis (1997) show that a positive productivity shock in production leads to time re-allocation. but the process of generating utility from consumer durables (including housing).As an alternative. home production is not just the purchase of durable goods (home).25 With substitutability between time and consumer durable in home production.

e. In sum. Their model obtains significant improvement in terms of fitting the data. Gomme. national data.2 Property prices.28 In 26 For instance. In equilibrium. there are several theoretical explanations for the residential and non-residential investment comovement. 2003b) for the analysis of the English experience.S. and the quantitative modeling is relatively satisfactory. Lane (2001) for more discussion. Kydland and Rupert (2001) allow for time-to-built stock accumulation (i. data. 13 . agents would naturally invest in both business and residential labor hours is positively related to the quantity and quality of household capital. respectively. For instance. investment comovement will be observed.S. generating higher levels of business capital and effective market labor hours. the time horizon for goods production and stock accumulation differ) and calibrate the model to emulate the U. find that the correlation between the residential property price and the real output is 0. a more comfortable home can make the sleeping time more “efficient” and lead to higher “productivity.26 Predicated on this assumption.27 Davis and Heathcote (2001) employing the U. 28 See Ortalo-Magne and Rady (1998. see Stockman and Tesar (1995). 4. general equilibrium models.53 and statistically significant. collateral and related issues Existing research has not been successful for explaining the price dynamics of the housing market..” 27 This seems to be true for a very large class of dynamic.

Driffill and Sola (1998) demonstrate that bubbles and switching processes are not easily distinguished. it is also difficult to establish the existence of bubbles. Montrucchio and Privileggi (2001). and local city data are remarkably different.30 Empirically.1475. Santos and Woodford (1997).29 Quantitative analysis of the property prices frequently are found to be less than satisfactory. cities is 0. (The average correlation between commercial property and real output is similar. Chen (2001a) finds that a rational bubble model is unable to explain the movements in stock prices 29 30 See Wang (2003) for a review of the related literature. find that the average correlation between residential property price and the real output for about 50 major U. Kan. A satisfactory joint explanation awaits future research with a unifying theory. An often-cited reason for failure of theory and reality is the existence of “housing price bubble”.1346.S. An obvious explanation for this discrepancy is that there is important reallocation of consumption as well as production activities across cities over the business cycles.S.contrast. the magnitudes for aggregate U. Yet the recent researche finds that the “bubble” is not an attractive explanation. For instance. the conditions for the existence of bubbles are very fragile. among others.) Though they are still statistically significant. 14 . 0. show that for discrete time models with rational agents. Kwong and Leung (2003) using city data. See Loewenstein and Willard (2000) for the case of continuous trading.

32 Their work is built around the variable severity of 31 32 See Hamilton and Whiteman (1985) for discussion on rational expectation and econometrics.and property prices in Taiwan. researchers either may need to either reject the rational expectation hypothesis. see Li and Yao (2005) (dynamic partial equilibrium model) and Chambers. Venti and Wise (1984. 2004) for alternative approaches. see Skinner (1989).31 Another alleged explanation for housing price cyclicality and volatility is the structure of the residential lending market. 1989). 15 . Garriga and Schlagenhauf (2005) (dynamic general equilibrium). For earlier related contributions. overlappinggenerations model. or proffer an alternative explanation. See also Ben-Shahar (1998. For more elaborate models. Ortalo-Magne and Rady (1998) are perhaps the first to differentiate residential housing from other kinds of capital in a dynamic general equilibrium. Thus. Sheiner and Weil (1992).

even a temporary income shock can generate very rich dynamics in such an endowment economy. Ortalo-Magne and Rady (1998.collateral constraints over the life cycle. See also Ortalo-Magne and Rady (2002a. Cossa and Krupka (2001) provide evidence that many young parents have little net worth.34 The case of “middle-aged” households is subtle. The significant interactions between the collateral value and the aggregate economic activities are also confirmed by a number of case studies for 33 See Bardhan et. 2003a.. homeowners. demographic change. Some of the middle group may be waiting for the opportunity to “tradeup”. b). 36 As a matter of fact. and would possibly exchange for small units (i. 34 See Davidoff (2004) for evidence that the elders indeed de-accumulate the housing stock by reducing maintenance. young agents do not own houses and an increase in the housing price would make it more difficult for them to buy. (2003) for the case of Singapore. 1999. al. In contrast. These theoretical analyses are buttressed by empirical research.e. which is consistent with the prediction of OrtaloMagne and Rady’s model. 35 Lusardi.33 For instance. Thus.35 Other “middle aged” households may have already “moved up”. (old agents) benefit from housing prices increases through capital gain without altering their housing demand (or supply). 16 . Ortalo-Magne and Rady (1998) find that the price of “houses” (large units) relative to “flats” (small units) vary systematically over the business cycle. trade down) to increase their available financial wealth for retirement consumption. income distribution changes and aggregate economic activity.36 housing transactions. b) extend this framework to explain the interactive dynamics among housing prices.

40 Chetty and Szeidl (2004). see Burnside. Edelstein and Lum (2003) for Singapore. unanticipated economic shock the (“lock-in” effect). show a clear interrelationship between and among real estate collateral values and aggregate economic activity. Eichenbaum and Rebelo (2001) and the references therein.38 The collateral role of housing may have important implications for asset pricing.37 Black. 39 Berkovec and Fullerton (1989. Seko (2003) for Japan. Ho and Wong (2003). Among others. and Kim (2003) for the case of Korea. Lau and Leong (2002). Liu and Shen (2003) for China. a 10% rise in net housing equity would increase the number of new businesses by 5%. Leung and Feng (2003) for Hong Kong. Cocco. 40 See Davidoff (2003) for empirical evidence. 1992) build general equilibrium models for the housing and portfolio choice.residential price cycles. Using micro data for Japan. For instance.” Mera and Renaud (2000). Leung.39 Those households with significant mortgage debt may need to adjust non-durable consumption when confronted by a negative. Ortalo-Magne and Rady (2003a) for England. Gan (2003) confirms the intuition that losses in collateral value significantly reduce investments. Flavin and Nakagawa (2004). and forces firms to rely more upon internal funds to finance investment. de Meza and Jeffreys (1996) find that for the United Kingdom. Gomes and Maenhout (2002). 38 There are alternative theories for financial crises. 37 17 . see Chen and Wang (2003) for the case of Taiwan. Collateral is recognized as playing an important role as a determinant for “financial crises.

S. and are independent of the business cycle in the United Kingdom. 18 . Kwok (2003). Adelman (1965) claims that “long cycles” do not exist. Ball. Piazzesi. Ball. 1999). Klotz and Neal (1973) verify the existence of “long cycles” with spectral and cross-spectral analysis. among others. Morrison and Wood (1996. Wheaton (1987) finds that the cycles of office vacancy and office development in the U. However. discover significant long cycles of new construction. 5. Employing the Kalman Filter technique and cross-country data. with periodicity of 20-30 years (so-called “Kuznets cycles”) in both residential and non-residential real estate markets. “Long Cycles” in Housing Empirical research repeatedly documents “long cycles” in the real property market. Schneider and Tuzel (2003). See Kelley (1969) for a literature review. Piazzesi and Schneider (2004).41 41 There is a large literature on “long swings” or “long cycles” or “Kuznets cycles”. are approximately 10 years. develop models that demonstrate that collateral and portfolio effects are closely interrelated and affect asset price volatility. Lizieri and MacGregor (1998) show that new commercial property cycles have a duration of 10 years. For instance.Gomes and Michaelides (2004).

The periodicity of housing cycles may be significantly longer than typical business cycles.42 and local. All these empirical regularities demand an explanation and the next section will provide a quick review on that. al. National building cycles are similar. in the Gottlieb micro data. See also Dokko et. vacancy rates in different communities at different time periods are similar. .The NBER monograph by Gottlieb (1976). regional and national cycles typically move together. Gottlieb. (1999) for more discussion.4 years. Vacancy rates also display dramatic cyclical movements. Interestingly. and a mean standard deviation of 5. is perhaps the most systematic analysis of the cycles in the real property market. 42 43 The mean periodicity is 19. investigating more than 100 real estate related time series from different cities in different countries.finds that local building cycles exhibit the mean periodicity of 19.0 years and a mean deviation is 4. This general finding can be traced back to Conklin (1935). 19 .7 years. Derksen (1940). They tend to “lead” the new building cycle. Adopting the Burns and Mitchell methodology. and amplitudes are larger than those of the business cycle.0 years.

For instance. However. The changes of new buildings seem to be much more in line with the change in supply and vacancy than changes in cost. Also. For the United States.1960. Once the real estate development project starts. strategic activities among real estate developers. it is costly to terminate or to reverse.1950. 44 See also Wickens (1941).43 Therefore. the value of a development is not independent of other developments nearby. 20 . Campbell (1963) shows that it is the “swings” or “cycles” in population that lead to “swings” in housing starts from 1890. since the landowner can always leave the land idle for the current period and develop it later. it has been suggested that the change of construction costs over time leads to the fluctuations of new building. this explanation is not consistent with the evidence.5. and finds that the changes in population. Why building cycles exist? Why does new building displays dramatic cyclical behavior? Many explanations have been proposed.44 An alternative explanation for real estate cycles hinges upon the. Lewis (1965) examines housing cycles between 1700.1. and shocks (such as wars and natural disasters) are the driving forces behind cycles. credit. The decision for constructing new buildings is an option. the question is: what changes the supply and vacancy? For England.

Lai. Much remains to be devised to reconcile the “strategic theory of cycles” with the empirical realities of long housing cycles. Early attempts to model this complex behavior have been conducted by. among others.”46 Fundamental research on the relationship between city for and structure and housing is needed for several reasons. 5. the world is becoming more urban. Wang and Zhou (2004). among others. First. Arnott and Small (1998). 21 . Lai (2003). Wang et. Much of housing market fluctuations may 45 46 See also Downing and Wallace (2002a.2 City and housing This section will discuss briefly the relationship between the urban city and the housing market. (2000). which is reviewed by Wang (2003). surveyed by Anas. the city is “a spatial concentration of a large number of people. There is a large literature on agglomeration. among others. and the need for pioneering research. For some recent development on the structure of cities. RossiHansberg (2004).45 These models are technically involved and partial equilibrium in nature. combining the option feature of real estate development with the strategic interactions of different developers is a difficult task. see Lucas (2001). Lucas and Rossi-Hansberg (2002). There is a related literature on the spatial structure of cities. al. The fundamental characteristic of a city is its density.Clearly. According to Bogart (1998). b). Wang and Zhou (2000). there is an increasing tendency for both population and economic activities to concentrate in cities.

may have important impacts upon household 47 For instance. If this were the case. see Chatterjee (2003). Torto Wheaton Research (2002) presents evidence that the real price of housing in Amsterdam over the 300 years displays no trend. we would observe a relationship between the growth and decline of cities. 22 . businesses and households move to other cities. the correlation between housing prices and city output is much lower than that for the national economy. has yet to be irrefutably and scientifically established. Rossi-Hansberg and Wright (2004). suggesting that there may be significant reallocations of economic activities and resource (including both capital and labor) across cities over time. and the relative housing prices across cities may have changed significantly as well. and housing prices. Alternatively. understanding urban city fluctuations may enhance our understanding of the relationship between the macroeconomy and the housing market.47 Thus. Third. Perhaps when the Amsterdam real housing price rises above a certain threshold. some cities “substitute” for other cities. such as the neighborhood effects. although it has experienced dramatic volatility. Second. This conjecture.actually emanate from fluctuations in urban areas. the micro-structure and non-market interactions. though often mentioned in the media.

5.48 How “non-market interactions” interact with the aggregate economic activities is an under-explored economic phenomena. Among these. and housing markets and urban structure. Glaeser and Kahn (2003). two questions deserve special highlighting. Glaeser and Gyourko (2001). Edelstein and Leung (2003). How will the housing market change in the era of globalization and financial integration?49 Second. the impacts of collateral upon housing and its “long cycles” for the housing market. There are many other interesting research topics about the nexus of the macroeconomics and housing. 23 .ownership behavior. Bardhan. 49 For instance. vacancy. etc. It examines the relationship between and among housing and taxation. and Ioannides (2003).) may be explained better by aggregating micro-behavior within cities. Perhaps macro-housing market fluctuations (prices. see Leung (2001). 50 See Jeske and Krueger (2004).3 New research frontiers for the macro-housing nexus This paper selectively reviews the existing literature about the nexus of the the macroeconomy and the housing market. Glaeser and Scheinkman (2003). see Glaeser (2000). how will housing market performance and the housing-macro finance system and capital markets change in the 48 Among others. Ioannides and Zabel (2000). Bardhan. new building. housing cycles and business cycles. Edelstein and Tsang (2004) for some preliminary attempts.

24 . especially in developing economies? How has the integration of the housing finance system changed the risk-sharing across the economy?50 Both of these issues deserve special research attention in the future.future.

311-331. 27. “The dynamic impact of macroeconomic aggregates on housing prices and stock of houses: a national and regional analysis. Azariadis. “Urban spatial structure. Ashok. forthcoming. (1991). “Long cycles—fact or artifact?” American Economic Review. mimeo.” Urban Studies. 17(2). Irma (1965). New York: North-Holland. Robert Edelstein and Charles Ka Yui Leung (2004). “Dualism and Macroeconomic Volatility. G. Rajarshi Datta. Anas.J. 88.” University of California. “Globalization and real estate returns. Ball. 55(3). Michael. Berkeley. services. durables and savings: an empirical study of separability in the long run. “Structures Investment and Economic Growth: A Long-Term International Comparison. Alan and Martin Feldstein (different years). Auerbach. "Expenditure allocation across nondurables. 1687-1706. 1-3. Rao and Mark Gertler (1991)." American Economic Review. 36. Tanya Morrison and Andrew Wood (1996). Costas and Bruce Smith (1998). 179-97. Robert Edelstein and Desmond Tsang (2004). Ball. Bardhan. 516-536. Richard Arnott and Kenneth Small (1998). Handbook of Public Economics. Ashok. Baffoe-Bonnie. Aghion. “Globalization and urban residential rents. Bardhan. Robert Edelstein and Lum Sau Kim (2003). Colin Lizieri and Bryan MacGregor (1998). London and New York: Routledge." Journal of Applied Econometrics.” Journal of Economic Literature. “A tale of two sectors: upward mobility and the private housing market in Singapore. Aiyagari. Abhijit Banerjee and Thomas Piketty (1999). 12. vol. Philippe. Michael. 25 . "Asset returns with transactions costs and uninsured individual risk. John (1998). 6(2). Ashok. Anderson.Reference Adelman." Journal of Monetary Economics.” Journal of Urban Economics. 1359-97. The Economics of Commercial Property Markets. 444-463.” Journal of Real Estate Finance and Economics. "Financial intermediation and regime switching in business cycles. 153-68.” Quarterly Journal of Economics. Bardhan. 1426-1464. 83-105. 33(9). Alex. 114(4).” Journal of Housing Economics.

David de Meza and David Jeffreys (1996). “On the optimality of the hybrid tenure mode. and business fluctuations.” Housing Studies.” Economic Journal. “A general equilibrium model of housing. 60-75. 18(3). 147-155. Danny (2004). 69-92. 241-269.” Journal of Real Estate Research. 7(1). and portfolio choice. Exchange Rates and Nonresident Investors: Their Influence on Residential Property Values. “House prices. Ben and Mark Gertler (1989). borrow. Alex (1994). “Measuring Business Cycles: Approximate Band-Pass Filters for Economic Time Series. Brito. Black. "Are consumer durables important for business cycles. 26 .” Journal of Housing Economics.” American Economic Review. 433-61. The Economic of Cities and Suburbs. 5(3). Richard Rogerson and Randall Wright (1991). 81(4). “Housing and the macroeconomy in the United Kingdom. James and Don Fullerton (1989).Ball.” paper presented at the Hong Kong-Singapore Symposium of Real Estate. Benson. Arthur Schwartz and Greg Smersh (1999). “The general equilibrium effects of inflation on housing consumption and investment.” Journal of Political Economy. “Housing and Endogenous Long-Term Growth. Berkovec. James and Don Fullerton (1992). “Canadian/U.” Review of Economics and Statistics. Marianne (1996). Bernanke. Earl. taxes. 8. 100 (2). Ben-Shahar. Baxter. “Housing Investment: Long Run International Trends and Volatility. “Homework in macroeconomics: household production and aggregate fluctuations. and default. “Optimal incentive contracts when agents can save. 246-71. Bowen.S. Bogart. Benhabib.” Journal of Political Economy.” American Economic Review. Ben-Shahar. Baxter. 1166-87. 78. the supply of collateral and the enterprise economy.” Journal of Urban Economics. New Jersey: Prentice Hall. 14(2). Julia Hansen. net worth. “Agency costs. Jess. Marianne and Robert King (1999). 99. Bizer. 14-31." Review of Economics and Statistics.” Housing Policy Debate. 241-51. Michael and Andrew Wood (1999). William (1998). Berkovec. Jane. “Behavioral tenure choice. Paulo and Alfredo Pereira (2002). 185-209. 106. 79. 79.” Journal of Financial Intermediation. 51(2). 575-93. 390-429. David and Peter DeMarzo (1999). Danny (1998). 277-282.

S. 27 . Mitchell (1946). Chen. Nan-Kuang (2001b). Martin Eichenbaum and Sergio Rebelo (2001). Nan-Kuang (2001a).” American Economic Review. 508-518.” Journal of Political Economy. Nan-Kuang and Hsiao-Lei Chu (2002). C.” Journal of Political Economy. "Bank net worth. Yongsung (2000).” National Taiwan University. “Comovement. "Asset price fluctuations in Taiwan: evidence from stock and real estate prices during 1972-1992. Case. Chen. “Property Markets and Public Policy . excess volatility. New York: National Bureau of Economic Research. working paper. 1155-97. John Quigley and Robert Shiller (2001). Ricardo and Arvind Krishnamurthy (2001). 119-145. Burnside.. Nan-Kuang and Charles Ka Yui Leung (2003). “Propsective deficits and the Asian currency crisis. 93(3). “Multimarket Oligopoly: Strategic Substitutes and Complements.” Cowles Foundation Discussion Paper 1335.Spillovers through Collateral Effect. and W. 385-396. “Forbearance lending and looting: the role of a collateralized asset’s value. “Long swings in residential construction: the postwar experience. Case. John and Joao Cocco (2004). 46. “Comparing wealth effects: the stock market versus the housing market. 12 (2). 53(2). 215-232. Chatterjee." Journal of Asian Economics. mimeo. Campbell. M. 513-548.” Federal Reserve Bank of Philadephia. Karl. John Geanakoplos and Paul Klemperer (1985). Caballero. 48. Craig. Chen. “Real Estate and the macroeconomy.” paper presented at 2004 SED Meeting. working paper. employment. 415-36. “On the contribution of agglomeration economies to the spatial concentration of U.” Brookings Papers of Economic Activity. 109(6). 488-511. asset prices and economic activities. “How do house prices affect consumption? Evidence from micro data. Chen.” Journal of Monetary Economics. “International and domestic collateral constraints in a model of emerging market crises. Yale University. Chang. Measuring Business Cycles. A. and home production. 48. Jeremy.” National Taiwan University. Karl (2000). 2." Journal of Monetary Economics. Papers and Proceedings. Burns.Bulow. Burnham (1963). Campbell. Satyajit (2003).” Journal of Monetary Economics.

Princeton: Princeton University Press. 89(4). vol 1A-B. Conkiln. Royce Caines and Brigitte Ziobrowski (1999). “Do asset prices affect business investment? an empirical study.” paper presented in the “Nexus between the macro Economy and Housing” workshop. Davies.” paper presented at the 2004 SED Meeting.Chen. Billy (2003). Davis. Thomas (2003). (1935). Chetty. “Building costs in the business cycle: with particular reference to building sponsored by governments in the United States. Frontiers of Business Cycle Research. W. D. Thomas (2004). Berkeley. “Maintenance and the home equity of the elderly. Joao.: Public Affairs Press. vol 3. New York: North-Holland. Cheung. 421-34. 18(3). Paul and Edwin Mills ed. 43(3). New York: North-Holland. George. 28 . Ping. Cheng. Real Estate in American History. “Consumption and portfolio choice over the life cycle. (forthcoming). Berkeley. Constantinides. “Labor income. forthcoming in International Economic Review. Davidoff. C.” Journal of Political Economy.” working paper. 365-392.” University of California. 463-480. Cocco. “Housing and the business cycle. “The effects of inflation-induced tax increases on stock and housing prices. mimeo.” Journal of Real Estate Research. housing prices and homeownership. (1999). Alan Ziobrowski. Raj and Adam Szeidl (2004). Handbook of the Economics of Finance. Davidoff. “Money velocity around the world. Washington.D. Nan-Kuang and Hung-Jen Wang (2003). Handbook of Regional and Urban Economics. Morris and Jonathan Heathcote (2001).” Chinese University of Hong Kong. mimeo.” University of California. Cooley. Cheshire. Milton Harris and Rene Stulz ed. Cooley.” Scandinavian Journal of Economics. Thomas ed. mimeo.” forthcoming in Review of Financial Studies. Thomas and Kevin Salyer (1987). “Consumption commitments and asset prices. (1995). “Uncertainty and foreign real estate investment. Pearl Janet (1958). Francisco Gomes and Pascal Maenhout (2002).

cities. enterprise and credit policy. Bos. Downing. de Meza. Deaton. “The price and quantity of residential land in the United States. Englewood Cliffs. 153-163. Origins of Macroeconomics. “A real options approach to housing investment. D. Einarsson.” paper presented at the 2004 SED Meeting. Angus and Guy Laroque (2001).” Journal of Real Estate Research. (1940). “Home production with endogenous growth. Downing. Macmillan. 42. 87-105.” Journal of Economic Growth. Edelstein. 69-95. Robert Edelstein.S. 40(4). J. Peter and Yannie Ioannides (1993). Dobkins. New York : Routledge. Chris and Nancy Wallace (2002b). Englund.” Economic Journal.” Journal of Monetary Economics. Dimasi. Tor and Milton Marquis (1997). Robert and Sau Kim Lum (2003). Linda and Yannis Ioannides (2001). (ed. N. 39.” University of California. “Real estate income and value cycles: a model of market dynamics. Allan Lacayo and Daniel Lee (1999). “Long cycles in residential building: an explanation. 357-73. 8(2). 31(6). Berkeley.” Econometrica. “Housing. John and Martin Sola (1998). Driffill. “Housing investment dynamics and the estimation of hedonic price indexes. mimeo." Journal of Monetary Economics.” University of California.” National Tax Journal. 701-731. DiPasquale. Jospeh (1987). Denise and William Wheaton (1996). "Intrinsic bubbles and regime-switching. Berkeley. Dokko. “The effects of site value taxation in an urban area: a general equilibrium computational approach. 6. 18(1).J. 109. Derksen.” in Economics in a Changing World.” paper presented in the “Nexus between the macro Economy and Housing” workshop. Robert W. Yoon.Davis. “The dynamics of housing prices: an international perspective. David and David Webb (1999). “Spatial interactions among U. Morris and Jonathan Heathcote (2004).) (2002). “Housing prices and the wider economy using Singapore data. mimeo. by D. Dimand.: Prentice Hall.” Regional Science and Urban Economics. 551-569. 97-116. B. ed. Chris and Nancy Wallace (2002a). land prices and growth. “Wealth. 577-90. Urban economics and real estate markets. 29 .

Martin (2002). Marjorie and Shinobu Nakagawa (2004). Don and Yolanda-Kodrzycki Henderson (1989). “Collateral channel and credit cycle: evidence from the land-price collapse in Japan. working paper.” Federal Reserve Bank of Chicago.” Journal of Housing Economics. 1461-89. Glaeser. “The Social Consequences of Housing.Englund. Jesus and Dirk Krueger (2001). “A real explanation for heterogenous investment dynamics.” NBER Working Paper 9733. 337-357. “Urban decline and durable housing. 1. 6. Cambridge: Cambridge University Press. 119-136.. 1-23.” NBER Working Paper 10458. Flavin. Eighth World Congress. “Relative prices.” Hong Kong University of Science and Technology. Peter and Yannis Ioannides (1997). “Housing Taxation and Capital Accumulation. 39." Journal of Housing Economics. Edward and Jose Scheinkman (2003). Jie (2003). 391-413. Hansen. Irving (1933).” Harvard University.” Brookings-Wharton Papers on Urban Affairs. Jonas (1997). 449-474. Edward and Joseph Gyourko (2001). Edward and Matthew Kahn (2003). Fisher. Glaeser. “A model of housing in the presence of adjustment costs: a structural interpretation of habit persistence. Fernandez-Villaverde.” Journal of Monetary Economics. “Consumption and saving over the life cycle: how important are consumer durables?” University of Pennsylvania. sectors. 339-369. and industries. 1. Advances in Economics and Econometrics: Theory and Applications. complementarities and comovement among components of aggregate expenditures. “A disequilibrium model of the tax distortions among assets. Edward (2000). working paper. 30(2). Gan. ed. “Sprawl and urban growth. mimeo. Jonas (2001).” in M. 30 . L. "House price dynamics: an international empirical perspective. S. “The debt-deflation theory of great depressions. Gervais. Turnovsky. Glaeser. mimeo. “Nonmarket interactions. Edward and Bruce Sacerdote (2000). Glaeser.” Econometrica. Fisher. “The future of urban research: non-market interactions. Fullerton. 101-150. P. 9(1-2). Vol. Fisher. Dewatripoint.” Journal of Monetary Economics.” International Economic Review. 1. Glaeser. 49(7).

31 . Green. “Optimal life cycle asset allocation: understanding the empirical evidence. Hanushek. “When Tiebout meets Alonso. Manuel (1976). Paul. Bob and John Whalley (1985).” Journal of Public Economics. “Tax treatment of housing in a dynamic sequenced general equilibrium model. 281-304. “Measuring the rate of technological change in structures. 90-111.” forthcoming in Journal of Finance. 30(3): 549-59. J. Hanushek. New York: National Bureau of Economic Research. housing prices. "Home Production Meets Time to Build. and growth: a general equilibrium analysis.” Journal of Monetary Economics. “The Observable Implications of Selffulfilling Expectations. Ingemar and Charles Stuart (1989). Francisco and Alexander Michaelides (2004). 253-70. 449-54. Jeremy and Zvi Hercowitz (1991). Long Swings in Urban Development. Gomme. Finn Kydland and Peter Rupert (2001). Goulder. Gort. 265-296. 16(3): 353-73. Hamilton. 99. 27(2). Eric and John Quigley (1979). Eric and John Quigley (1980).” Regional Science and Urban Economics. Jeremy Greenwood and Peter Rupert (1999). “Tax policy. "The allocation of capital and time over the business cycle. (1964). James and Charles Whiteman (1985). mimeo. 6(1). “Tax policy. Spectral Analysis of Economic Time Series.” Review of Economic Dynamics. 25(2).” Stanford University. 1115-31. 1188-1214. Hamilton.” Real Estate Economics. 207-30." Journal of Political Economy. W. C. Michael. Princeton: Princeton University Press. Greenwood. Gottlieb. Hanushek." Review of Economics and Statistics. and housing investment. "What is the price elasticity of housing demand. 38(3). 2. Lawrence and Lawrence Summers (1989)." Journal of Urban Economics. Granger. 157-75. “Why Is Investment Subsidized?” International Economic Review. Goulder.Gomes. asset prices." Journal of Political Economy. "The Dynamics of housing market: a stock adjustment model of housing consumption.” Journal of Public Economics. “Follow the leader: how changes in residential and nonresidential investment predict changes in GDP. 19(2). 62(3). Lawrence (1989). Hansson. Richard (1997). Eric and Kuzey Yilmaz (2003). 109(5).

the real wage. and J. 19. Min and John Quigley (2004). “Interactive property valuations. Zvi and Michael Sampson (1991)." American Economic Review. F.” Boston College. (1981). 293-316. V. “The allocation of capital between residential and nonresidential uses: taxes." Quarterly Journal of Economics. 3(2). Matteo and Raoul Minetti (2002). "Output.” Boston College. Iacoviello. 109. Matteo (2002b). Henderson. Hooker.S. “Introducing risky housing and endogenous tenure choice into a portfolio-based general equilibrium model. “House prices and business cycles in Europe: a VAR analysis. “The nexus between the macro economy and housing: evidence from Hong Kong. 38(3). Hendershott. Mark (2000). Berkeley. Patric and Yunhi Won (1992). 1215-1237. 145-170. vol 4. Yannis (2003).” Journal of Macroeconomics. Ho. and employment fluctuations. Hwang. "A theory of debt based on the inalienability of human capital. Hendershott. Lok Sang and Gary Wong (2003).” Journal of Public Economics. metropolitan regions. “Financial liberalization and the sensitivity of house prices to monetary policy: theory and evidence. Iacoviello. Thisse (forthcoming)." Journal of International Money and Finance. Matteo (2002a).” Journal of Finance. mimeo. mimeo. borrowing constraints and monetary policy in the business cycle. 583-600. New York: John Wiley and Sons. Hercowitz. Hendershott. 32 . A. “inflation and extraordinary returns on owner-occupied housing: some implications for capital allocation and productivity growth. Patric and Sheng-Cheng Hu (1981). Handbook of Regional and Urban Economics. Iacoviello. inflation and capital market constraints. 841-879.” paper presented in the “Nexus between the macro Economy and Housing” workshop. "Misspecification versus bubbles in hyperinflation data: Monte Carlo and interwar European evidence. Patric and Sheng-Cheng Hu (1983). Oliver and John Moore (1994). 53.” Manchester School. Time Series Models.” University of California. “House prices. 81. Ioannides. mimeo. New York: North-Holland. forthcoming. Harvey.Hart. growth. “Economic fundamentals in local housing markets: evidence from U. 48(3). 795-812.” Journal of Urban Economics. C. 177-203.

Kan. Donald and Daniel Winkler (2002).” Chinese University of Hong Kong. 419-445. 633-656. Kambon (2000). Kan. “Zipf’s Law for cities: an empirical examination. “Neighborhood effects and housing demand. Ioannides. 1-31. 33(1).” paper presented at the 2004 SED Meeting. "Over-investment. mimeo. 29(4)." Japan and the World Economy. Neale and Palle Anderson (1994). Kim.” Journal of Applied Econometrics. “Dynamic Modeling of Housing Tenure Choice”. Mervyn (1994). “Housing and the Korean economy. forthcoming.” Journal of Economic History. "The dynamics and volatility of commercial and residential property prices: theory and evidence. 181-201. mimeo. Kwong. Journal of Urban Economics. Yi and Zhixiong Zeng (2003). Kamhon. Kyung-Hwan (2003). 38.” Journal of the Japanese and International Economies. Allen (1969). Jud. Kennedy. 46-69. Yong Jin and Jong Wha Lee (2002). collateral lending. 14. Takatoshi (1993).Ioannides.” paper presented in the “Nexus between the macro Economy and Housing” workshop. 95-123. 29-45. Kelley. Journal of Urban Economics. Kambon (1999). 44(1). “Housing and the macroeconomy: the role of implicit guarantees for government sponsored enterprises. Yannis and Henry Overman (2003). “Demographic cycles and economic growth: the long swing reconsidered.” Regional Science and Urban Economics. 45." Journal of Regional Science. Kim. "Household saving and real house prices: an international perspective.” European Economic Review." Monetary and Economic Department. “Residential investment in a multi-sector monetary business cycle model. 7(1). Karsten and Dirk Krueger (2004). “Debt deflation: theory and evidence. 48. 127-137. King. 33 . 23(1-2). Yannis and Jeffrey Zabel (2000). Bank for International Settlements. Ito. Kan. and economic crisis. 72-96. “The land/housing problem in Japan: a macroeconomic approach.” Journal of Real Estate Research. “The Dynamics of Metropolitan Housing Prices. Jeske. Sunny Kai Sun and Charles Ka Yui Leung (2004). Jin. “Expected and Unexpected Residential Mobility”.

Arvind (2003). Nobuhiro and John Moore (1998). 277-92. UK: Edward Elgar Pub.” Review of Economics and Statistics. Klein. “An aggregate model of firm specific capital with and without commitment. working paper. Kiyotaki. Nobuhiro (1998) “Credit and Business Cycles. Cheltenham." Journal of Political Economy. Kiyotaki. 48.” Stanford University.” Journal of Economic Dynamics and Control. Kiyotaki." London School of Economics. Nobuhiro and John Moore (1997). unpublished lecture notes. Kiyotaki. Robert (1992)." Journal of Real Estate Finance and Economics. King. "Liquidity and asset prices. Sunny Kai Sun and Charles Ka Yui Leung (2000).” Journal of Monetary Economics.” City University of Hong Kong. Lawrence ed. Robert and Sergio Rebelo (1993). Krusell. Economic Policy and Related Subjects. Kwok. Kwong. 49(1). 867-96. mimeo. Claudian Siu-Kit (2002). "Credit chains. mimeo. 291-98. Krishnamurthy.” City University of Hong Kong. 105. 217-237. “The effects of a credit constrained sector on asset pricing. Claudian Siu-Kit (2003). "Price volatility of commercial and residential property. "Credit cycles. Klotz. “Low frequency filtering and real business cycles. “Collateral Constraints and the Amplification Mechanism. Nobuhiro and John Moore (2001). 55(3). Per and Anthony Smith (1998). working paper." London School of Economics. Kwok.” Journal of Political Economy.” Journal of Economic Theory. Kwok. 207-231. Kubler. Claudian Siu-Kit (2001).King. Benjamin and Larry Neal (1973). 111(2).” Japanese Economic Review . “Stationary equilibria in asset-pricing models with incomplete markets and collateral. 211-248. working paper. 25-36. Felix and Karl Schmedders (2001). 106(5). 17. “Spectral and cross-spectral analysis of the longswing hypothesis. “Credit market imperfections and asset prices. “Notes on business cycles” University of Rochester. 20. 18-35. “Income and Wealth Heterogeneity in the Macroeconomy. 34 . (2001) Landmark Papers in Economic Fluctuations.

Leung. Charles Ka Yui (2001).S. Charles Ka Yui (2003). Charles Ka Yui and Dandan Feng (2003). 5(2). Leung. “A model of life-cycle housing choices with uninsurable labor income and house price risks. Charles Ka Yui and Youngman Chan Fai Leong (2004). 8. 329-357. J. capital investment.Lai. forthcoming. “Housing. “Sale before completion of development: pricing and strategy. Lamont. Lane.” Journal of Real Estate Finance and Economics. Charles Ka Yui and Zhixiong Zeng (2004). 32. 498-514. 35 . mimeo. "Economic Growth and increasing house price.” University of Macau. Leung. cities." Journal of Real Estate Research.” Real Estate Economics. Leung. 5-20. 54(2). property tax. 541-554. Lewis. Wenli and Rui Yao (2004). Leung.” paper presented at the 2004 SED Meeting. 30(3). the saving rate and relative volatility of housing price. Building Cycles and Britain’s Growth. Charles Ka Yui (2002). Garion Chi Keung Lau and Youngman Chan Fai Leong (2002) "Testing alternative theories of the property price-trading volume correlation.” Chinese University of Hong Kong. Rose Nang (2003). Leung. Rose Nang. 7(3).” Open Economies Review. and credit market imperfections. mimeo. and tariff in a small open economy. 23(3). Charles Ka Yui. “Welfare effects of capital taxation in a small open economy. London: St. Li.” Journal of International Economics. Ko Wang and Yuqing Zhou (2004). Lai. "Income tax. Charles Ka Yui (1999). Philip (2001). "Relating international trade to the housing market. mimeo. Lin. Martin’s Press. 183-190. "Collateral constraint." Pacific Economic Review." Chinese University of Hong Kong. “Option-based theory of real estate development: a literature review." Review of Development Economics.” RAND Journal of Economics. Owen and Jeremy Stein (1999). 9(1). 253-263." Review of International Economics. mimeo.” Chinese University of Hong Kong. Parry (1965). Shuanglin and Wei Zhang (1998). Leung. Leung. “The new open economy macroeconomics: a survey. “Leverage and house-price dynamics in U. “Housing price dispersion: an empirical investigation. 235-266. 328-35. “What drives the property price-trading volume correlation? Evidence from a commercial property market.

Hongyu and Yue Shen (2003).” European Economic Review.” Econometrica. 142645. 46. 17-58. working paper.Liu. 34(3). Robert and Esteban Rossi-Hansberg (2002). “On the internal structure of cities. Kiminori (1990).” Cambridge: Cambridge University Press. Lustig. “Bankruptcy and asset prices. Robert (1978). 1445-1476. “Housing markets. working paper.” Journal of Economic Theory. Ricardo Cossa and Erin Krupka (2001). Hanno (2003). Lucas. 137-153.” University of Chicago. 28.” University of Chicago. E. New York: M. Lustig. Matsuyama. Recursive Macroeconomic Theory. “An empirical study on the nexus between real estate and macro economy in China. Credit. Lars and Thomas Sargent (2000). 245267. Robert (2001). Hanno (2001). “Rational equilibrium asset-pricing bubbles in continuous trading models. “The market price of aggregate risk and the wealth distribution.” Review of Economic Dynamics. Loewenstein. Mera.” Journal of International Economics. Thomas and Didier Sornette (2002). Annamaria. 70(4). Ljungqvist. Alan (1979). “On Rational Bubbles and Fat Tails. Lucas. 762-794. and Banking. 36.. Lustig. working paper. Miles. consumption and financial liberalization in the major economies. "Asset prices in an exchange economy. Macfarlane. David (1992). 4. Cambridge: MIT Press. “Residential investment and the current account. Koichi and Bertrand Renaud ed. “Externalities and cities. Asia’s Financial Crisis and the Role of Real Estate. Lucas. The Origins of English Individualism: the family.” paper presented in the “Nexus between the macro Economy and Housing” workshop. Sharpe. Lusardi. 589-610. “Housing collateral. 91. consumption insurance and risk premia: an empirical perspective.” Journal of Human Resources.” Journal of Money. 2000. 36 .” University of Chicago." Econometrica. 36. “Savings of young parents. Hanno and Stijn Van Nieuwerburgh (2003). property and social transition. Mark and Gregory Willard (2000). 1093-1136. Lux.

Ortalo-Magne.” Journal of Housing Economics.” Canadian Journal of Economics. 266-279. Soren B. “ high income dispersion. vol 2.onerealtorplace. mimeo. Handbook of Regional and Urban Economics. Ortalo-Magne. Ortalo-Magne. and housing: the long run in a small open economy. mimeo. Ortalo-Magne. 43. 11. (1986). and Peter B. Novy-Marx. "Housing market fluctuations in a lifecycle economy with credit constraints. “Budgetary and efficiency effects of housing taxation in the United States. available at http://www. Luigi and Fabio Privileggi (2001). Francois and Sven Rady (1998). 755-766. 27(1). "On fragility of bubbles in equilibrium asset pricing models of Lucas-type. New York: North-Holland. Peter ed." Journal of Economic Theory. Ortalo-Magne. 37 . 198-217. New York: North-Holland.Mills. mimeo.nsf. Francois and Sven Rady (2002a). Madison. Edwin ed. vol 1." European Economic Review. agency costs. “Homeownership: low household mobility. “Bank capital. and monetary policy.” paper presented in the “Nexus between the macro Economy and Housing” workshop. 158-88. Handbook of Regional and Urban Economics. capital taxation. Ortalo-Magne." Stanford University GSB Research paper 1501. Nijkamp. Montrucchio.” University of Wisconsin.” Journal of Urban Economics. Sorensen (1994). working paper. Francois and Sven Rady (1999). National Association of Realtors (2003)." London School of Economics. "Boom in. Moran. Francois and Sven Rady (2003a). (1987). Robert (2003). Existing Single-Family Home Prices: 1969Present. Yasuhiro and Alfredo Pereira (1996). 39(1). 101.” Bank of Canada. volatile housing prices. Francois (1997). “Housing transactions and macroeconomic fluctuations: a case study of England. "Fluctuations in a life-cycle economy: do credit constraints matter.” University of Chicago. Kevin (2004). “Tenure choice and the riskiness of non-housing consumption. “An equilibrium model of investment uncer uncertainty. Francois and Sven Rady (2002b). Nakagami. 68-86. bust out: young households and the housing price cycle. Nielsen.

Francois and Sven Rady (2003c). Martin and Aaron Tornell (2000). consumption and asset pricing. “Housing. Seko. “Housing prices and economic cycles: evidence from Japanese Prefectures. Sakolski.” University of Wisconsin.” UCLA. “Urban structure and growth.” Journal of Monetary Economics. Santos. New York: Harper & Brothers Publishers. Piazzesi. 623-650. 65.” paper presented at the 2004 SED Meeting. working paper. mimeo. Miki (2003). mimeo. "Housing market dynamics: on the contribution of income shocks and credit constraints. “Housing vs. 38 . Paasche. Matt Chambers.” paper presented at the 2004 SED Meeting. forthcoming. Manuel and Michael Woodford (1997). Ottoson. 69-106. Monika. “Homeownership and public housing policy. 279-299. Martin Schneider and Selale Tuzel (2003). 48. “Capital structure in an industry equilibrium with endogenous liquidation values. Rosellon. Rossi-Hansberg. “Homeownership and derivatives. Rossi-Hansberg. M. research in progress. Schneider.Ortalo-Magne. Land Use Policy and Problems in the United States. 19-57.” paper presented in the “Nexus between the macro Economy and Housing” workshop. Carlos Garriga and Don Schlagenhauf (2004)." Econometrica. Schneider. Monika and Martin Schneider (2004). Martin and Aaron Tornell (2003). Esteban and Mark Wright (2004). “Optimal urban land use and zoning. Ortalo-Magne. Bernhard (2001). financial wealth: a crosscountry comparison. The Great American Land Bubble: the amazing story of landgrabbing.” Review of Economic Studies. 4. A. and booms from Colonial days to the present time. Francois and Sven Rady (2003b). Madison. speculations.” European Finance Review. Piazzesi. 7. “Balance sheet effects.” Review of Economic Dynamics. Madison. Miguel (2000). "Rational asset pricing bubbles. “Soft landings. Lincoln: University of Nebraska Press.” University of Wisconsin. bailout guarantees and financial crises.” paper presented at the 2004 SED Meeting. Esteban (2004). “Credit constraints and international financial crises. (1932).” UCLA. Howard (1963).

Alan and Linda Tesar (1995). Boston: Torto Wheaton Research. Skinner. 59(3). Stein. 207-243.” Econometrica. Real Estate Cycles and Outlook 2002. Chung Yi and Charles Ka Yui Leung (2002)." American Economic Review. 379-406. Torto Wheaton Research (2002). by Yukio Noguchi and James Poterba. "Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements. “Housing Wealth and Aggregate Saving. “The housing wealth of the aged. 305-24. (2002). Jonathan (1989). 10(1). Skinner. 39 . Tse. Cheltenham. Jonathan (1996b) “Is housing wealth a sideshow?” in David Wise ed. Andrei and Robert Vishny (1992). 85(1).” NBER Working Paper 4115.” Regional Science and Urban Economics. (1995). Venti. Jonathan (1996a) “The Dynamic Efficiency Cost of Not Taxing Housing. Landmark Papers in Macroeconomics. Chicago: Univesity of Chicago Press. Louise and David Weil (1992). 1343-66." Review of International Economics. Jeremy.Sheiner. 397-417.. C. Economics of Aging. Cheltenham. “Liquidation Values and Debt Capacity: A Market Equilibrium Approach. Solow. ed. 5(2). Robert ed.” in Housing Markets in the United States and Japan. 168-85. 105-46. Landmark Papers in Economic Growth. E. 110. Chicago: University of Chicago Press.” Journal of Finance. 19(2).” Journal of Public Economics. “Moving and housing expenditure: transaction costs and disequilibrium. Shleifer. UK: Edward Elgar Pub. Skinner. (2001). “Housing and saving in the United States. 47(4). Tobin.” Journal of Public Economics. Steven and David Wise (1984). "Increasing wealth and increasing instability: the role of collateral. 23. Slutsky. Skinner. Jonathan (1994). (1937). Stockman. “The summation of random causes as the source of cyclic processes. UK: Edward Elgar Pub. "Prices and Trading Volume in the Housing Market: A Model with Down-Payment Effects. 45-52. James ed." Quarterly Journal of Economics.

and construction. 121-39. moving and housing wealth.” American Real Estate and Urban Economics Association Journal. ed. 40 . Chicago: University of Chicago Press. Wang.” Journal of Urban Economics. Ko and Yuqing Zhou (2000). Wheaton. New York: North-Holland. William and Raymond Torto (1988).Venti. Wheaton. Wang. 1270-92. “Vacancy Rates and the Future of Office Rents.” Real Estate Economics. 98(6)." Review of Financial Studies. Su Han Chan. 2(2). William (1987) “The Cyclical Behavior of the National Office Market. William (1990) “Vacancy. family incomes.” in Economics of Aging. “Aging. William and Raymond Torto (1994).” in Handbook of Regional and Urban Economics: Advances in Urban Economics. Steven and David Wise (1989). 15(4). Wang. Residential Real Estate: its economic position as shown by values. By David Wise. together with estimates for all real estate. Yi (2001). Wheaton. and K. Nijkamp. “Dynamic urban models: agglomeration and growth. "Non-Discriminating Foreclosure and Voluntary Liquidating Costs. Leslie Young. 959-985. 16(4). by R. 27(2). New York: National Bureau of Economic Research. Wheaton. ed. Chau (2000). “Office Rent Indices and Their Behavior over Time. and Prices in a Housing Market Matching Model.” Real Estate Economics." International Real Estate Review. Ko. Wheaton. 437-44. 493-522. 35(2). “Overbuilding: a game-theoretic approach. 281-99. William (1999) “Real Estate Cycles: Some Fundamentals. W. 15. David (1941). Ping (2003). forthcoming. rents. Yuqing Zhou. 3. 9-48. Wicken. Wang. financing. "Over-Confidence and Cycles in Real Estate Markets: Cases in Hong Kong and Asia. and Yuqing Zhou (2002).” Annals of Economics and Finance. Search. Ko.” Journal of Political Economy. “Residential investment and economic growth. Wen. 93-108. 209-30. 28. Capello and P.” American Real Estate and Urban Economics Association Journal. 430-36.