Should the optimal portfolio be region-specific? A multi-region model with monetary policy and asset price co-movements

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

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Detail(s)

Original languageEnglish
Pages (from-to)293-304
Journal / PublicationRegional Science and Urban Economics
Volume41
Issue number3
Publication statusPublished - May 2011

Abstract

A multi-region, dynamic stochastic general equilibrium (MRDSGE) model is built to show that differences in the price elasticity of housing supply can be related to stylized facts on regional differences in (1) house price level, (2) house price volatility, (3) monetary policy propagation mechanism and (4) household asset portfolio. In addition, regional house prices are found to move more closely with regional fundamentals than with the national GDP. The correlation between the national stock price and the regional housing price also vary significantly across regions, which suggests that optimal portfolio should be region specific. © 2011 Elsevier B.V.

Research Area(s)

  • E32, E52, Housing market, Monetary policy, R10, R33, Region-specific portfolio, Regional economic difference