Sticky House Price? – Barcelona GSE Master Projects 2014

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2014. The project is a required component of every master program.


Sticky House Price?

Author:

Vorada Limjaroenrat

Master Program:

Macroeconomic Policy and Financial Markets

Paper Abstract:

The assumption of fully flexible house price is widespread in several general equilibrium monetary models. In this paper, I provide selective survey of existing evidence, arguing that rigidities do exist in house price movements, along with empirical and theoretical contributions. In the 18 OECD countries evidence-based VAR analysis of monetary transmission mechanism, a rent puzzle arises as real rent increases in response to exogenous increase in interest rate, opposite with what the theory suggests. In the final part of the paper, 18 OECD countries are divided into two subgroups of low and high credit market flexibility. The results present interesting linkages between sticky price, bubbles, monetary policy, and credit market condition that should be high on future research agenda.

Read the full paper or view slides below:

Private Information or (and?) Local Thinking during the Housing Bubble

A few weeks ago I came across a research paper named “Wall Street and the Housing Bubble” by Cheng, Raina and Xiong (2012). I found it while I was reading the always-interesting (and diverse) blog “Nada es Gratis”.  In here, you can find (in spanish) a thorough synopsis of what the article is about. The paper analyzes whether the experts in securitization were aware of the housing bubbles and the possibility of the collapse of housing prices in the US. Namely, they test the “Inside Job” view, popularized by the film of the same name which held the view (among other things) that insiders were aware of the financial bubble during 2004-2006 and its inner workings. At first glance their results are at least thought-provoking.

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