Asset price spillover, collateral and crises : With an application to property market policy

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

29 Scopus Citations
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Detail(s)

Original languageEnglish
Pages (from-to)351-385
Journal / PublicationJournal of Real Estate Finance and Economics
Volume37
Issue number4
Publication statusPublished - Nov 2008

Abstract

This paper studies the impact of land supply elasticity and land use regulation. For sufficiently adverse shocks constrained entrepreneurs liquidate their assets for debt repayment. This effect can spillover to the residential property market. A crisis occurs when households are forced to default on their mortgages as well. While both converting costs and land use regulation tend to magnify the effect of adverse shock, the former generates an asymmetric effect between a positive and a negative shock on the land market, and the latter tends to raise the likelihood of a crisis, by raising the threshold value of liquidation. © 2007 Springer Science+Business Media, LLC.

Research Area(s)

  • Asset prices, Crisis, Property market policy, Real estate markets, Spillover