Housing, Finance and the Macroeconomy

77 Pages Posted: 24 Jul 2014

See all articles by Morris A. Davis

Morris A. Davis

Rutgers Business School

Stijn Van Nieuwerburgh

Columbia University Graduate School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

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Date Written: July 2014

Abstract

In this chapter, we review and discuss the large body of research that has developed over the past 10-plus years that explores the interconnection of macroeconomics, finance, and housing. We focus on three major topics -- housing and the business cycle, housing and portfolio choice, and housing and asset returns -- and then review the recent literature that studies housing and the macroeconomy during the great housing boom and bust of 2000-2010. Our emphasis is on calibrated models that can be compared to data. In each section, we discuss the important questions, the typical set of tools used, and the insights that result from important papers. Although great progress has been made in understanding the important role that housing plays in understanding macroeconomic phenomena, work remains. For example, economists cannot fully explain all of the volatility in house prices during the unprecedented boom and bust period of 2000-2010. At the end of the chapter, we discuss a new literature that assesses the macroeconomic effects and welfare implications of housing policies.

Suggested Citation

Davis, Morris A. and Van Nieuwerburgh, Stijn, Housing, Finance and the Macroeconomy (July 2014). NBER Working Paper No. w20287, Available at SSRN: https://ssrn.com/abstract=2471180

Morris A. Davis (Contact Author)

Rutgers Business School ( email )

Rutgers Business School
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Newark, NJ 07102
United States

Stijn Van Nieuwerburgh

Columbia University Graduate School of Business ( email )

3022 Broadway
Uris Hall 809
New York, NY New York 10027
United States

HOME PAGE: http://https://www0.gsb.columbia.edu/faculty/svannieuwerburgh/

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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