Understanding Booms and Busts in Housing Markets∗
نویسندگان
چکیده
Some booms in housing prices are followed by busts. Others are not. It is generally diffi cult to find observable fundamentals that are useful for predicting whether a boom will turn into a bust or not. We develop a model consistent with these observations. Agents have heterogeneous expectations about long-run fundamentals but change their views because of “social dynamics.”Agents with tighter priors are more likely to convert others to their beliefs. Boom-bust episodes typically occur when skeptical agents happen to be correct. The booms that are not followed by busts typically occur when optimistic agents happen to be correct. J.E.L. Classification: E32.
منابع مشابه
BoomS and BuStS in houSing marketS determinantS and imPlicationS
In 2009 all ECB publications feature a motif taken from the €200 banknote. 1 We are grateful to Carsten Detken, Gerard Korteweg, an anonymous referee and participants at the European Central Bank seminar on booms and busts in housing markets for helpful comments. Any views expressed represent those of the authors and not necessarily those of the European Central Bank. Fax +49 69 1344 6000 All r...
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