Abstract

http://ssrn.com/abstract=1710093
 


 



Real Estate, the External Finance Premium and Business Investment: A Quantitative Dynamic General Equilibrium Analysis


Yi Jan


Monash University

Charles Ka Yui Leung


City University of Hong Kong

Zhixiong Zeng


Monash University

November 16, 2010

Real Estate Economics, Forthcoming

Abstract:     
This paper studies the connection between the capital market and the real estate market. Empirically, we find that positive real house price shocks lower the external finance premium and stimulate nonresidential investment and real GDP. Our theoretical framework is able to mimic the volatility of the external finance premium, the relative price of real estate and capital, and the investment in real estate and capital. It also captures the cyclicality of the external finance premium and of real estate prices. The contribution of real estate price fluctuations to the variability of the external finance premium and the GDP is confirmed to be significant.

Keywords: External Finance Premium, Residential and Corporate Real Estate, Capital Market Imperfections, Equilibrium Default, Real Estate Price Volatility

JEL Classification: E44, D82, R21, R31

Accepted Paper Series


Not Available For Download

Date posted: November 17, 2010  

Suggested Citation

Jan, Yi and Leung, Charles Ka Yui and Zeng, Zhixiong, Real Estate, the External Finance Premium and Business Investment: A Quantitative Dynamic General Equilibrium Analysis (November 16, 2010). Real Estate Economics, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1710093

Contact Information

Yi Jan
Monash University ( email )
Wellington Road
Victoria, 3145
Australia
Charles Ka Yui Leung (Contact Author)
City University of Hong Kong ( email )
83 Tat Chee Avenue
Kowloon
Hong Kong
Zhixiong Zeng
Monash University ( email )
Department of Economics
Monash University
Caulfield East, Victoria 3145
Australia
+61-3-99034045 (Phone)
+61-3-99031128 (Fax)
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