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