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Working Paper
The role of housing in labor reallocation
This paper builds a dynamic general equilibrium model of cities and uses it to analyze the role of local housing markets and moving costs in determining the character and extent of labor reallocation in the US economy. Labor reallocation in the model is driven by idiosyncratic city-specific productivity shocks, which we measure using a dataset that we compile using more than 350 U.S. cities for the years 1984 to 2008. Based on this measurement, we find that our model is broadly consistent with the city-level evidence on net and gross population flows, employment, wages and residential ...
Journal Article
Macroeconomic models with heterogeneous agents and housing
The housing sector?s important role in the U.S. economy is hard to miss: Real estate held in household portfolios in 2004 was worth $17 trillion, and the mortgage market now totals more than $7.5 trillion. ; To understand how this sector and related government policies affect households and the economy, economists attempt to incorporate housing and housing finance into heterogeneous agent models?macroeconomic models that capture the economic and demographic diversity among households. This article provides a progress report on this line of research via a discussion of four papers, presented ...
Working Paper
House prices, credit growth, and excess volatility: implications for monetary and macroprudential policy
Progress on the question of whether policymakers should respond directly to financial variables requires a realistic economic model that captures the links between asset prices, credit expansion, and real economic activity. Standard DSGE models with fully-rational expectations have difficulty producing large swings in house prices and household debt that resemble the patterns observed in many developed countries over the past decade. We introduce excess volatility into an otherwise standard DSGE model by allowing a fraction of households to depart from fully-rational expectations. ...