Working papers, Department of Economics, WU (Wirtschaftsuniversität Wien)
Joint adjustment of house prices, stock prices and output towards short run equilibrium
() and Dieter Gstach
Abstract: A dynamic IS-LM model including stocks and houses as
additional assets will be analyzed in this paper. Providing also housing
services, a major consumption item for most households, houses create an
additional link between the monetary and the real sector of the economy.
The adjustment path of output, house prices and stock prices after
exogenous policy shocks will be derived within a rational expectation
setup. This will show how different reaction patterns of asset prices are
related to different elasticities of housing services demand. These general
analytical results are contrasted with relevant empirical work,
particularly Lastrapes , leading to the identification of plausible
elasticity ranges. The particular results for those shed new light upon the
ongoing discussion about demand effects from real estate wealth and about
determinants of house price fluctuations.
JEL-Codes: E44; E52; R21; (follow links to similar papers)
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