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Housing, Capital Investment, and Credit Market Imperfections

Author

Listed:
  • Zhixiong Zeng
  • Charles Ka Yui Leung
Abstract
We study the role of residential housing in financing capital investment in a dynamic stochastic general equilibrium framework. Residential housing, though nonproductive, is shown to be important in determining the cost of external financing for investment on productive capital. Housing stock serves as collaterals in financial contracts for capital investment. We find that fluctuations in the return to capital investment is not enough for accounting the cyclical behavior of external finance premia and bankruptcy rates. Fluctuations of house prices help generate countercyclical external finance premia and bankruptcy rates by a great deal

Suggested Citation

  • Zhixiong Zeng & Charles Ka Yui Leung, 2004. "Housing, Capital Investment, and Credit Market Imperfections," 2004 Meeting Papers 207, Society for Economic Dynamics.
    • Handle: RePEc:red:sed004:207
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    Cited by:

    1. Leung, Charles, 2004. "Macroeconomics and housing: a review of the literature," Journal of Housing Economics, Elsevier, vol. 13(4), pages 249-267, December.

    More about this item

    Keywords

    Housing; Capital Investment; Credit Market Imperfections;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General

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