Topic：A Theory of Housing Demand Shocks
Speaker：Wang Pengfei，HKUST
Time:13:30–15:00
Date: March 25， 2019
Venue：Room 106B，Zhonghui Building

Introduction to Speaker：
Professor Wang joined HKUST in 2007 after obtained his Ph.D degree in Economics at Cornell. He is promoted to associate professor (with tenure) in 2013. His research interest lies in the areas of business cycles, financial economics, and monetary economics. His recent research focuses on asset bubbles and credit market frictions, which are pervasive in emerging markets. Professor Wang has published 14 articles in top journals such as Econometrica, American Economic Review, Journal of Economic Theory, Journal of Monetary Economics, American Economic Journal: Macroeconomics, Review of Economic Dynamics, and Journal of Economic Dynamics and Control.
 
Abstract:
Aggregate housing demand shocks are an important source of house price fluctuations in the standard macroeconomic models, and through the collateral channel, they drive macroeconomic fluctuations. These reduced-form shocks, however, fail to generate a highly volatile price-to-rent ratio that comoves with the house price observed in the data (the “price-rent puzzle”). We build a tractable heterogeneous-agent model that provides a microeconomic foundation for housing demand shocks. The model predicts that a credit supply shock can generate large comovements between the house price and the price-to-rent ratio. We provide empirical evidence from crosscountry and cross-MSA data to support this theoretical prediction.