BOFIT Discussion Papers, Institute for Economies in Transition, Bank of Finland
What Can an Open-Economy DSGE Model Tell Us about Hong Kong’s Housing Market?
() and Paetz Michael
Abstract: This paper develops an open-economy DSGE model with a
housing-market sector and a borrowing constraint. Contrary to standard
conventions, domestic households are allowed to invest in foreign housing
and vice versa. Using Bayesian methods, the model is applied to data for
Hong Kong. The results show that Hong Kong’s housing market is quite open
to foreign investment, and perhaps more significantly, that variations in
the loan-to-value ratio and housing preference shocks largely explain
business cycle volatility.
Keywords: DSGE models; housing; open economy; Hong Kong; (follow links to similar papers)
JEL-Codes: D91; E21; E44; F41; (follow links to similar papers)
45 pages, November 22, 2010
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