Housing Market Fluctuation and the Effectiveness of Macroeconomic Management
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| Title | Housing Market Fluctuation and the Effectiveness of Macroeconomic Management
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| Author | Huang Zhigang and Xu Wei |
| Organization | Central University of Finance and Economics |
| Email | zghuang@pku.edu.cn；wxu@drc.gov.cn |
| Key Words | housing markets, business cycles, macroeconomic policies |
| Abstract | This paper sets up a dynamic stochastic general equilibrium model with multi-sector to study the relation between housing markets and business cycles, and to analyze efficiency of combinations of policies under investment shocks. Simulations demonstrate that, when the leverage rate of housing markets increases, housing markets become more volatile, causing unstable macro-economy. Housing markets is countercyclical under supply shocks, and aggregate demand management policies face a tradeoff between stability of output and sector structure. Structural reduction of taxes and fees can keep output and sector structure stable under investment shocks. Macro-prudential policy can diminish volatility of housing markets with scarifying output. When the first best policy is difficult to implement, a second best combination of policies is an active monetary policy with a structural reduction of taxes and fees and a macro-prudential policy to balance three goals: stabilizing economic growth, controlling house prices and balancing economic structure. |
| Serial Number | WP1204 |
| Time | 2017-07-04 |
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