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Abstract.  Several cities and countries in Asia and North America have experienced large increases in housing prices. We extend the 1991 paper by S. Rebelo to simulate this situation. We show that growth in real housing prices can result as economic growth persists, even when population growth is zero. Another finding is that reported increases in housing prices might be underestimated. In particular, the growth rate of a relative price index may converge to zero even when house prices in real terms display sustained growth.

AbstractThe house price‐to‐income ratio (PIR) is widely used as an affordability indicator. This paper complements the cross‐sectionally focused literature by proposing a tractable model for the PIR dynamics. Our model predicts that the PIR is very persistent and is correlated to the lagged aggregate output. Cross‐country analysis confirms this prediction and provides evidence for a long‐term, positive, and significant relationship between PIR and aggregate production. Our results hint at the construction of an early warning system for housing market mispricing. Our tractable formulation of a stochastic money growth rule may carry independent research interest.

AbstractThis paper studies whether (and how) corporate decisions are affected by internal factors (e.g., the financial conditions of own company) and external factors (e.g., the actions of local competitors) in an imperfectly competitive environment. We study the listed real estate developers in Beijing as a case study. Our hand‐collected dataset includes transaction‐level information booked indicators (e.g., profitability, liability, and liquidity) and unbooked financial indicators (political connections). Our multi‐step empirical model shows that both the firm's financial conditions and its competitors' counterparts are essential but play different roles in the output design, pricing, and the time‐on‐the‐market (TOM). Internal versus external factors' relative importance relates nonlinearly to the degrees of market concentration. Market leaders' existence alters the small firms' strategy and leads to higher selling prices and slower selling pace in the local market. Our comprehensive financial indicators (booked and unbooked) better predict corporate behaviors than traditional measures.

We present cross-country evidence that a country's macroeconomic volatility, measured either by the standard deviation of output growth or the occurrence of trend-growth breaks, is significantly affected by the country's historical variables. In particular, countries with longer histories of state-level political institutions experience less macroeconomic volatility in postwar periods. Robustness checks reveal that the effect of this historical variable on volatility remains significant and substantial after controlling for a host of structural variables investigated in previous studies. We also find that the state history variable is more important in countries with a higher level of macroeconomic volatility.

A perennial debate worldwide over housing aid policy focuses on whether the government should provide housing vouchers or subsidized public housing units. To complement the empirically- dominated literature, this paper builds a general equilibrium model that merges urban land use (monocentric city) and Tiebout frameworks. In our model, public housing units or housing vouchers are rationed and some lower-income people have to compete with those with higher incomes in the private rental market. We discuss how location of public housing units is an essential policy variable in addition to the numbers and sizes of units, and argue why housing vouchers may be preferable to public housing.

AbstractWe examine how fluctuations in financial and housing markets in the United States affect asset returns and GDP in Hong Kong. In contrast to studies using linear specifications, which find that the United States and Hong Kong are virtually delinked in terms of the asset markets, our regime‐switching models indicate that an unexpected change in US stock returns, followed by the TED spread, has the most significant effect on Hong Kong asset returns and GDP, typically in a regime of high return and low volatility. For in‐sample one‐step‐ahead forecasting, the US term spread is the best predictor.