Intrinsic cycles of land price : A simple model
Research output: Journal Publications and Reviews (RGC: 21, 22, 62) › 21_Publication in refereed journal › peer-review
Related Research Unit(s)
|Journal / Publication||Journal of Real Estate Research|
|Publication status||Published - Jul 2006|
|Link to Scopus||https://www.scopus.com/record/display.uri?eid=2-s2.0-33748279100&origin=recordpage|
The cyclicality and volatility of property prices have been extensively documented. Many explanations have been proposed. This paper builds a simple dynamic general equilibrium model in which these often cited channels are assumed away. Instead, the role of intertemporal elasticity of substitution is highlighted. In this model, the land price can exhibit price cycles. Moreover, the land price always fluctuates more than the aggregate output. The welfare of different cohorts depends crucially on the land price at the period they were born. The implications of these results are discussed.