Real Estate Price Inflation, Monetary Policy, and Expectations in the United States and Japan
IMF Working Papers, January 1, 1994
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- Real Estate Price Inflation, Monetary Policy, and Expectations in the United States and Japan
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Bibliographic details
- Authors: Hossein Samiei, Garry J. Schinasi
- Published: January 1, 1994
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451925555.001
Summary
- During the mid- to late 1980s, inflationary pressures were highly concentrated in asset markets in many industrial countries.
- The paper discusses potential reasons for this concentration and develops a forward-looking supply and demand model of the real estate market.
- Equilibrium prices in the model depend on price expectations, monetary conditions, income, returns to alternative assets, and construction costs.
- In the model, the current equilibrium price is determined by expectations formed in different time periods by consumers and producers.
- The model and 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.
Model and Methods
- Model type: Forward-looking supply and demand model of the real estate market.
- Key determinants of equilibrium prices: price expectations; monetary conditions; income; returns to alternative assets; construction costs.
- Expectations: Formed in different time periods by consumers and producers and determine current equilibrium price.
- Estimation method: Maximum-likelihood estimation of the basic model and its more generalized dynamic specifications.
Empirical Findings
- The empirical results do not reject the view that the relationship between real estate values and monetary policy was altered in 1980s.
- Focus period: mid- to late 1980s (asset-market concentrated inflationary pressures).
Policy-Relevant Themes and Keywords
- Subject areas: 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.