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Reconstructing the great recession
This paper evaluates the role of the construction sector in accounting for the performance of the U.S. economy before, during and after the Great Recession. We use input-output analysis to evaluate its linkages with the rest of the economy and measure the transmission of its demand shocks to the overall economy. Such effects are quantified by means of a dynamic multi-sector model parameterized to reproduce the boom-bust dynamics of employment in construction during 2000-13. The model suggests that the interlinkages account for a large share of the actual changes in aggregate employment and ...
Mortgage Borrowing and the Boom-Bust Cycle in Consumption and Residential Investment
This paper studies the transmission of the major shocks in the U.S. housing market in the 2000s to consumption and residential investment. Using geographically disaggregated data, I show that residential investment is more responsive to these shocks than consumption, as measured by elasticities and the implied contributions to GDP growth. I develop a structural life-cycle model featuring multiple types of housing investment to understand the large responses of residential investment. Consistent with the microdata, the model generates lumpy debt accumulation, lumpy housing investment and a ...
Monetary Policy, Residential Investment, and Search Frictions: An Empirical and Theoretical Synthesis
Using a factor-augmented vector autoregression (FAVAR), this paper shows that residential investment contributes substantially to GDP following monetary policy shocks. Further, it shows that the number of new housing units built, not changes in the sizes of existing or new housing units, drives residential investment fluctuations. Motivated by these results, this paper develops a dynamic stochastic general equilibrium (DSGE) model where houses are built in discrete units and traded through searching and matching. The search frictions transmit shocks to housing construction, making them ...