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The decision to move house and aggregate housing-market dynamics

Ngai, L. Rachel and Sheedy, Kevin D. (2016) The decision to move house and aggregate housing-market dynamics. CFM discussion paper series (CFM-DP2016-21). Centre For Macroeconomics, London, UK.

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Abstract

Using data on house sales and inventories, this paper shows that housing-market dynamics are driven mainly by listings and less so by transaction speed, thus the decision to move house is key to understanding the housing market. The paper builds a model where moving house is essentially an investment in match quality, implying that moving depends on macroeconomic developments and housing-market conditions. The endogeneity of moving means there is a cleansing effect — those at the bottom of the match quality distribution move first — which generates overshooting in aggregate variables. The model is applied to the 1995–2004 housingmarket boom.

Item Type: Monograph (Discussion Paper)
Official URL: http://www.centreformacroeconomics.ac.uk/Home.aspx
Additional Information: © 2016 The Authors
Divisions: Centre for Macroeconomics
Subjects: H Social Sciences > HB Economic Theory
JEL classification: D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search; Learning; Information and Knowledge; Communication; Belief
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E22 - Capital; Investment (including Inventories); Capacity
R - Urban, Rural, and Regional Economics > R3 - Production Analysis and Firm Location > R31 - Housing Supply and Markets
Sets: Research centres and groups > Centre for Macroeconomics
Date Deposited: 13 Dec 2017 08:23
Last Modified: 09 Apr 2019 23:07
URI: http://eprints.lse.ac.uk/id/eprint/86227

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