Demand shocks and price stickiness in housing market dynamics

Research output: Journal article publicationJournal articleAcademic researchpeer-review

Abstract

The current study establishes a dynamic stochastic general equilibrium model with sticky housing prices and compares the heterogeneous macro effects of exogenous uncertainty shocks on housing market dynamics in China. Based on Bayesian estimation, the findings indicate that 1) intertemporal/intratemporal preference and liquidity constraint shocks significantly affect housing market dynamics through different channels; 2) macro effects of demand shocks exhibit frequency-domain dependence, thereby suggesting the crucial role of stickiness; and 3) housing price stickiness significantly exacerbates fluctuation and postpones the convergence of housing markets under demand shocks, particularly in the post-crisis period; additionally, it asserts an asymmetric effect in booming and cooling markets. Furthermore, the counterfactual analysis provides policy suggestions to correct the housing market dynamics associated with demand shocks and price stickiness.

Original languageEnglish
Article number105820
JournalEconomic Modelling
Volume110
DOIs
Publication statusPublished - May 2022

Keywords

  • China
  • Demand shock
  • Frequency dependence
  • Sticky housing price

ASJC Scopus subject areas

  • Economics and Econometrics

Fingerprint

Dive into the research topics of 'Demand shocks and price stickiness in housing market dynamics'. Together they form a unique fingerprint.

Cite this