International capital flows and expectation-driven boom-bust cycles in the housing market

Research output: Contribution to journalArticle

12 Citations (Scopus)

Abstract

This paper analyzes the roles of credit market conditions in endogenous formation of housing-market boom-bust cycles in a business cycle model. When households are uncertain about the duration of a temporary high income growth period, expected future house prices rise during the high growth period and fall at the end of the period. But this development causes expectation-driven boom-bust cycles in current house prices only if the economy is open to international capital flows. It is also shown that high maximum loan-to-value ratios for residential mortgages per se do not cause boom-bust cycles without international capital flows in the model.

Original languageEnglish
Pages (from-to)1993-2009
Number of pages17
JournalJournal of Economic Dynamics and Control
Volume34
Issue number10
DOIs
Publication statusPublished - 2010 Oct
Externally publishedYes

Fingerprint

Cycle
Business Cycles
Industry
Model
Market
Housing market
International capital flows
House prices
Market conditions
Income growth
Household
Loans
Business cycle model
Credit markets
Mortgages

Keywords

  • Boom-bust cycles
  • Credit market frictions
  • Financial liberalization
  • House prices
  • Informational overshooting

ASJC Scopus subject areas

  • Economics and Econometrics
  • Control and Optimization
  • Applied Mathematics

Cite this

International capital flows and expectation-driven boom-bust cycles in the housing market. / Tomura, Hajime.

In: Journal of Economic Dynamics and Control, Vol. 34, No. 10, 10.2010, p. 1993-2009.

Research output: Contribution to journalArticle

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