Real Estate, the External Finance Premium and Business Investment: A Quantitative Dynamic General Equilibrium Analysis

Yi Jin (), Charles Leung and Zhixiong Zeng ()

MPRA Paper from University Library of Munich, Germany

Abstract: This paper studies the connection between the capital market and the real estate market. Empirically, we find that positive real house price shocks lower the external finance premium and stimulate nonresidential investment and real GDP. Our theoretical framework is able to mimic the volatility of the external finance premium, the relative price of real estate and capital, and the investment in real estate and capital. It also captures the cyclicality of the external finance premium and of real estate prices. The contribution of real estate price fluctuations to the variability of the external finance premium and the GDP is confirmed to be significant.

Keywords: External Finance Premium; Residential and Corporate Real Estate; Capital Market Imperfections; Equilibrium Default; Real Estate Price Volatility. (search for similar items in EconPapers)
JEL-codes: D82 E44 R21 R31 (search for similar items in EconPapers)
Date: 2010-11
New Economics Papers: this item is included in nep-bec, nep-dge, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Real Estate, the External Finance Premium and Business Investment: A Quantitative Dynamic General Equilibrium Analysis (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:26722

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