House Prices, Real Estate Returns, and the Business Cycle
European Central Bank (ECB) - Directorate General Research
April 9 , 2007
Swiss Finance Institute Research Paper No. 06-37
The main objective of this work is to develop a general equilibrium business cycle model linking financial and real estate markets to the macro economy. The ability of a production economy to account simultaneously for asset pricing, business cycle and real estate market facts is then evaluated by comparing the model predictions to the empirical facts. The observed high volatility of house prices, the equity premium and the difference between equity and real estate excess returns can be explained without giving rise to excessive risk-free rate variation.
Number of Pages in PDF File: 39
Keywords: house prices, real estate returns, equity premium, business cycles, production economies
JEL Classification: E30, E22, G12working papers series
Date posted: January 20, 2007
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