Heterogeneous expectations, housing bubbles and tax policy

Beschreibung

We investigate a plausible expectation formation and learning scheme of boundedly rational investors into a standard user cost housing market model, involving a rental and a housing capital market. In particular, investors switch between heterogenous expectation rules according to an evolutionary fitness measure, given by the rules' past profitability. We analytically show that our housing market model may produce endogenous boom-bust dynamics. Furthermore, we demonstrate that policy makers may use our model as a tool to explore how different tax policies may affect the housing market's steady state, its stability and out-of-equilibrium behavior.

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Carolin Martin

Themen in »Heterogeneous expectations, housing bubbles and tax policy«

Housing markets bounded rationality and learning bubbles and crashes heterogenous expectations steady state and stability analysis tax policy

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