Event Title

Was Housing to Blame? A DSGE Analysis of the Great Recession

Location

Diamond 141

Start Date

1-5-2014 1:00 PM

End Date

1-5-2014 4:00 PM

Project Type

Presentation

Description

I develop a dynamic stochastic general equilibrium model with nominal price rigidities and monopolistic competition in order to explore how exogenous changes in housing prices affect output. Positive shocks to housing prices increase households net worth in the form of unrealized capital gains, and, therefore, their sense of wealth. This wealth effect is propagated through the dynamic IS function in terms of increased consumer spending. I determine a significant feedback effect and attribute a large proportion of the decline in the growth of output to the calamitous drop in housing prices witnessed during the Great Recession.

Faculty Sponsor

Michael Donihue

Sponsoring Department

Colby College. Economics Dept.

CLAS Field of Study

Social Sciences

Event Website

http://www.colby.edu/clas

ID

607

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May 1st, 1:00 PM May 1st, 4:00 PM

Was Housing to Blame? A DSGE Analysis of the Great Recession

Diamond 141

I develop a dynamic stochastic general equilibrium model with nominal price rigidities and monopolistic competition in order to explore how exogenous changes in housing prices affect output. Positive shocks to housing prices increase households net worth in the form of unrealized capital gains, and, therefore, their sense of wealth. This wealth effect is propagated through the dynamic IS function in terms of increased consumer spending. I determine a significant feedback effect and attribute a large proportion of the decline in the growth of output to the calamitous drop in housing prices witnessed during the Great Recession.

http://digitalcommons.colby.edu/clas/2014/program/185