Real Estate Price Inflation, Monetary Policy, and Expectations in the United States and Japan
January 1, 1994
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Summary
During the mid- to late 1980s, inflationary pressures were highly concentrated in asset markets in many industrial countries. This paper discusses why this may have occurred and then develops a forward-looking supply and demand model of the real estate market in which equilibrium prices depend on price expectations, monetary conditions, income, returns to alternative assets, and construction costs. In this model, the current equilibrium price is determined by expectations formed in different time periods by consumers and producers. The model and its more generalized dynamic specifications are estimated by maximum-likelihood methods. The empirical results do not reject the view that the relationship between real estate values and monetary policy was altered in 1980s.
Subject: Asset prices, Housing prices, Inflation, Land prices, Monetary base, Money, Prices, Real estate prices
Keywords: asset price inflation, Asset prices, construction cost, goods-price inflation, Inflation, Land prices, Monetary base, monetary policy, property price, Real estate prices, real interest rate, user-cost model, WP
Pages:
50
Volume:
1994
DOI:
Issue:
012
Series:
Working Paper No. 1994/012
Stock No:
WPIEA0121994
ISBN:
9781451925555
ISSN:
1018-5941
