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      HOUSING MARKETS, EXPECTATION FORMATION AND INTEREST RATES

      , ,
      Macroeconomic Dynamics
      Cambridge University Press (CUP)

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          Abstract

          Based on a behavioral stock-flow housing market model in which the expectation formation behavior of boundedly rational and heterogeneous investors may generate endogenous boom-bust cycles, we explore whether central banks can stabilize housing markets via the interest rate. Using a mix of analytical and numerical tools, we find that the ability of central banks to tame housing markets by increasing the base (target) interest rate, thereby softening the demand pressure on house prices, is rather limited. However, central banks can greatly improve the stability of housing markets by dynamically adjusting the interest rate with respect to mispricing in the housing market.

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          Discretion versus policy rules in practice

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            Heterogeneous beliefs and routes to chaos in a simple asset pricing model

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              Herd Behaviour, Bubbles and Crashes

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                Author and article information

                Journal
                Macroeconomic Dynamics
                Macroecon. Dynam.
                Cambridge University Press (CUP)
                1365-1005
                1469-8056
                March 2022
                July 15 2020
                March 2022
                : 26
                : 2
                : 491-532
                Article
                10.1017/S1365100520000279
                1b5978d3-e341-4c28-b5ed-84973a4adfa1
                © 2022

                https://www.cambridge.org/core/terms

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