Heterogeneous traders, house prices and healthy urban housing market: A DSGE model based on behavioral economics

He, Yiyao; Xia, Fangzhou

doi:10.1016/j.habitatint.2019.102085

Cited by 17 publications

(2 citation statements)

References 44 publications

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“…This is worse if speculations are rampant. Speculative activities in property purchases are found to experience a rapid rise but slow decline in prices (He and Xia, 2019). This ultimately led to risks of a cyclical high number of foreclosures, which causes a market crash.…”

Section: Review Of Literaturementioning

confidence: 99%

Dynamic implications of GDP, interest rates, taxes, income, foreign direct investments, housing prices on property NPLs

Tham¹,

Said²,

Adnan³

2021

IJHMA

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Purpose The study on how macroeconomic factors affect non-performing loans (NPLs) have not been focussed on property loans, which had been amongst the largest contributor of NPLs in many countries. At the same time, whilst there are many studies that focusses on NPLs during the recession and financial crises, not many studies focus on how macroeconomic factors affect property NPLs in a recovering economic environment. The purpose of this study seeks to fill the gap by analysing the relationships between gross domestic product (GDP), interest rates, income, foreign direct investments (FDI), housing prices and taxes on property NPLs with Malaysia as a case study in which NPLs rose for the first time after declining for almost a decade since the 2008–2009 global financial crisis. This study aims to understand the dynamics and direction of causation in relationships. Design/methodology/approach The author uses the auto regressive distribution lag analysis between the independent variables of GDP, interest rates, housing prices, service taxes, percapita income and FDI affecting the dependent variable of property NPLs from 2009 to 2017, during a unique period of recovering economic environment where NPLs rose for the first time in almost a decade of decline. Findings This study found that interest rates, housing prices, income, GDP and service taxes were found to possess long cause effects and long run elasticity with NPLs. At the same time, interest rates were found to implicate property NPLs significantly in longer periods, followed by GDP, housing prices, service taxes and income. FDIs were found to be insignificantly negative in implicating property NPLs in the long run. Research limitations/implications This paper allows policymakers to understand the dynamic implications of crucial macroeconomic factors in affecting NPLs so that appropriate strategic monetary policies could be formulated towards addressing them. More focus shall be given to addressing the long term implications of these factors on NPLs. Practical implications Appropriate strategic monetary policy making can be channelled towards addressing these factors via understanding the short and long term implications of macroeconomic variables on property NPLs. Policymakers can take note of the long cause effects and long run elasticity of average interest rates, housing prices, income levels, GDP and service taxes with property NPLs so that appropriate long term policies can be addressed to control the rise of property NPLs in the country. At the same time, priority should be given towards strengthening of the GDP of the country due to its strongest impact in long term effects with reduction of NPLs in the country. Social implications The insights from the present study suggest policymakers interested in bringing stability in the real estate finance system need to account for the various macroeconomic variables found in this study. Originality/value The paper is novel on at least two dimensions. First, this study involves focussing on a unique period of recovering economic environment where NPLs rose for the first time after a decade of decline since recovering from the 2008–2009 global financial crisis. At the same time, this study focusses on property NPLs, which is unique in nature compared to general NPLs. This study had enabled policymakers to better understand the dynamic implications of several macroeconomic variables affecting property NPLs and assist them in strategic monetary policy making.

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Section: Review Of Literaturementioning

confidence: 99%

Dynamic implications of GDP, interest rates, taxes, income, foreign direct investments, housing prices on property NPLs

Tham¹,

Said²,

Adnan³

2021

IJHMA

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“…For the housing market, Kuang (2014) is able to generate endogenous credit and house price cycles via differing households' expectations. Also, He and Xia (2020) incorporate fundamental and speculative investors into an otherwise standard DSGE model, finding that house prices rise quickly following a productivity shock, with speculators increasing their ownership. However, this result is not revealed without the productivity shock in the context of endogenous house price cycles.…”

Section: Rationality Vs Backward-looking Expectationsmentioning

confidence: 99%

Housing cycles and their regulation: an agent-based analysis

Tarne

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Is it done? Are you sure? If I have learned anything, then that there is always another step to do. These past years have been challenging, intense, but also very rewarding. I would not be here without the immense support of a many people. I extend my heartfelt thanks to all those that helped me get here. First and foremost I want to express my gratitude to my two supervisors Prof. Dr. Dirk Bezemer and Dr. Thomas Theobald. Dirk, your guidance and conversations over the years have been invaluable to me. Even though I was in Groningen only for a few months and the rest in Düsseldorf and mostly in Berlin, our communication worked very well for me. I could always count on your timely feedback and support during critical times, helping me navigate through (some self-created) obstacles. I truly appreciated our discussions, where you consistently pushed me to improve my thinking and understanding.Thomas, thank you for your support and helping getting my grips on the agent-based model I was working with. You were always honest with me and gave so much of your time to supporting me. I remember how after so many meetings we were both sitting there with rauchenden Köpfen, but most of the time feeling we understood more. I will never forget you helping me to write my research proposal close to a deadline in your free time on a Saturday night, every sentence crafted with sweat and the help of coca cola. I came a long way since then as there is now finally enough Butter bei die Fische.Another big thanks goes to the IMK in Düsseldorf, who funded most of my PhD and who gave me something like a home. I really enjoyed the time I spent at the institute, the lunch breaks with economic and political discussions, and all your supportive encouragements when I was struggling with my work. Thank you

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Subannual, Seasonal and Interannual Variability of Data on Residential Construction Market - Case Study for Poland

Mach

Paszkiel

Grubiak

2021

Control, Computer Engineering and Neuroscience

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Heterogeneous traders, house prices and healthy urban housing market: A DSGE model based on behavioral economics

Cited by 17 publications

References 44 publications

Dynamic implications of GDP, interest rates, taxes, income, foreign direct investments, housing prices on property NPLs

Dynamic implications of GDP, interest rates, taxes, income, foreign direct investments, housing prices on property NPLs

Housing cycles and their regulation: an agent-based analysis

Subannual, Seasonal and Interannual Variability of Data on Residential Construction Market - Case Study for Poland

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