A simple model of a speculative housing market

Dieci, Roberto; Westerhoff, Frank

doi:10.1007/s00191-011-0259-8

Cited by 72 publications

(51 citation statements)

References 55 publications

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“…18 Dieci and Westerhoff (2012) perform a preliminary investigation of the impact of such factors within a simple dynamic framework where house price changes are driven by excess demand.…”

Section: Conclusion and Further Researchmentioning

confidence: 99%

Heterogeneous Expectations, Boom-Bust Housing Cycles, and Supply Conditions: A Nonlinear Dynamics Approach

Dieci

Westerhoff

2015

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe combine a standard stock-flow housing market model, incorporating explicit relationships between house prices, the housing stock, and the rent level, with a parsimonious expectation formation scheme of housing market investors, reflecting an evolving mix of extrapolative and regressive expectation rules. The model results in a two-dimensional discrete-time nonlinear dynamical system. Based on realistic parameters, the model is able to generate endogenous boom-bust housing market dynamics with lasting periods of overvaluation and overbuilding. We thus exploit our model to investigate how real forces, in particular supply conditions, interact with expectations-driven housing market fluctuations.

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“…18 Dieci and Westerhoff (2012) perform a preliminary investigation of the impact of such factors within a simple dynamic framework where house price changes are driven by excess demand.…”

Section: Conclusion and Further Researchmentioning

confidence: 99%

Heterogeneous Expectations, Boom-Bust Housing Cycles, and Supply Conditions: A Nonlinear Dynamics Approach

Dieci

Westerhoff

2015

SSRN Journal

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“…We believe that the price adjustment mechanism we have suggested could find interesting application in all those real‐world markets in which auction mechanisms play a role. Most obvious candidates for this are the large number of markets in which speculative behavior is relevant, for example the financial markets and the housing market (see Dieci & Westerhoff, ). In other words, in all markets where agents, which are basically speculators, base their decisions regarding purchases and sales not only on current prices of goods and assets but also on the mechanism of formation of future prices.…”

Section: Discussionmentioning

confidence: 99%

On controlling chaos in a discrete‐time Walrasian tâtonnement process

Naimzada

Sordi

2017

Metroeconomica

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The simple pure exchange model with two individuals and two goods introduced by Day and Pianigiani in 1991, later extensively analyzed by Day and taken up again by Mukherji, is discussed and extended with the purpose of showing that chaos in a discrete tâtonnement process of this kind can be controlled if the auctioneer uses a smooth, nonlinear formulation of the price evolution process such that the price adjustment is a sigmoid-shaped function of the excess demand, with given lower and upper limits. In particular, we show that, given the price adjustment speed and the excess demand function, the auctioneer can (a) stabilize the dynamics, (b) reduce the complexity of the attractor and (c) increase the economic significance of the adjustment process by simply acting on the lower and/or upper limits that constrain price dynamics. | IN TRO DUCT IO NThe issue of the dynamics of the Walrasian tâtonnement process has recently been subject to a renewed burst of interest. In the last 25 years or so, attention has been especially concentrated on discrete-time formalization of the process in a 'pure exchange economy' in which all agents are consumers, there is no production and all agents can do is to exchange their initial endowments. These formalizations have been shown to be capable of producing different types of complicated price adjustments to disequilibrium between supply and demand of a good. As a result, there exists by now an extensive literature on the 'chaotic tâtonnement' in a pure exchange economy where it is broadly speaking possible to distinguish the following three strands of research.

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“…But still, given that most macro models fail to include the housing sector, even fewer model house price cycles, with some exceptions that are grounded in PKE, behavioural economics or heterogeneous agents modelling. Dieci and Westerhoff (2012) present a model of the housing market where endogenous price cycles emerge from the interaction of actors with fundamentalist and those with momentum-based expectations, however, they do not offer a full macroeconomic model. On the PKE side, Ryoo (2016) presents a model where household form extrapolative expectations about house price increases and use increased borrowing to finance consumption, which drives the boom.…”

Section: Models Of House Price Cyclesmentioning

confidence: 99%

Building blocks for the macroeconomics and political economy of housing

Stockhammer

Wolf

2019

The Japanese Political Economy

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Housing has played an essential part in the global financial crisis 2007-08 and the Euro crisis. Large parts of bank lending go to mortgages. Housing wealth is the largest part of wealth for most households and is, at the same time, more dispersed than other forms of wealth. House prices exhibit pronounced fluctuations that are closely linked to credit growth. Housing thus plays a crucial role in the macroeconomy, which has become even more pronounced under neoliberalism. We scrutinise different theoretical approaches to housing. Despite its theoretical shortcomings mainstream economics has pioneered empirical research on wealth effects in consumption and recently documented the role of house prices in financial cycles. Post-Keynesian theory emphasises endogenous money creation, cycles in asset prices and debt, and have formalised the notion of a debt-driven demand regime. Comparative Political Economy research has recently developed the concept of the varieties of residential capitalism, which has different structures of house ownership and housing finance at the core of political coalitions. Marxist political economy has long established the intrinsic link between ownership of land and economic rent and notes that homeownership can act as force of working class fragmentation. Wealth surveys can be used to trace the extent of conflicting interests in a class-relational approach.

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A simple model of a speculative housing market

Cited by 72 publications

References 55 publications

Heterogeneous Expectations, Boom-Bust Housing Cycles, and Supply Conditions: A Nonlinear Dynamics Approach

Heterogeneous Expectations, Boom-Bust Housing Cycles, and Supply Conditions: A Nonlinear Dynamics Approach

On controlling chaos in a discrete‐time Walrasian tâtonnement process

Building blocks for the macroeconomics and political economy of housing

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