Quotation Punzi, Maria Teresa, Lambertini, Luisa, Mendicino, Caterina. 2017. Expectations-driven cycles in the housing market. Economic Modelling 60, 297-312.




This paper explores the transmission of “news shocks” in a model of the housing market and shows that anticipated signals or beliefs of future macroeconomic developments can generate boom-bust cycles in the housing market and lead to business cycle fluctuations. Anticipated monetary policy and inflationary shocks that turn out to be wrong can also lead to subsequent macroeconomic recessions. Credit frictions also play an important role in generating boom-bust cycle dynamics in the housing market. In particular, favorable credit conditions that are expected to be reversed in the near future generate an housing boom. The active use of the loan-to-value ratio as a policy tool aimed at dampening the severity of expectations-driven cycles effectively reduces the volatility of household debt, aggregate consumption and GDP.


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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Economic Modelling
Citation Index SSCI
WU Journalrating 2009 A
WU-Journal-Rating new VW-D
Language English
Title Expectations-driven cycles in the housing market
Volume 60
Year 2017
Page from 297
Page to 312
DOI http://dx.doi.org/10.1016/j.econmod.2016.10.004


Punzi, Maria Teresa (Former researcher)
Lambertini, Luisa (EPFL, College of Management, Switzerland)
Mendicino, Caterina (European Central Bank, Directorate General Research, Monetary Policy Research, Germany)
Department of Economics (Kubin) (Details)
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