Related papers: Housing Bubbles with Phase Transitions
We present a general equilibrium macro-finance model with a positive feedback loop between capital investment and land price. As leverage is relaxed beyond a critical value, through the financial accelerator, a phase transition occurs from…
We study an overlapping generations (OLG) exchange economy with an asset that yields dividends. First, we derive general conditions, based on exogenous parameters, that give rise to three distinct scenarios: (1) only bubbleless equilibria…
In this article, we develop a model for the evolution of real estate prices. A wide range of inputs, including stochastic interest rates and changing demands for the asset, are considered. Maximizing their expected utility, home owners make…
The price-bubble and crash process formation is theoretically investigated in a two-asset equilibrium model. Sufficient and necessary conditions are derived for the existence of average equilibrium price dynamics of different agent-based…
This article provides a self-contained overview of the theory of rational asset price bubbles. We cover topics from basic definitions, properties, and classical results to frontier research, with an emphasis on bubbles attached to real…
We show that a simple model of a spatially resolved evolving economic system, which has a steady state under simultaneous updating, shows stable oscillations in price when updated asynchronously. The oscillations arise from a gradual…
We develop a stochastic free-boundary model of housing tenure decisions in markets with high mobility risk, such as areas near military installations. Housing prices and rents follow correlated diffusion processes, and households face an…
Asset price bubbles are situations where asset prices exceed the fundamental values defined by the present value of dividends. This paper presents a conceptually new perspective: the necessity of bubbles. We establish the Bubble Necessity…
Recently research on bubble and its burst attract much interest of researchers in various field such as economics and physics. Economists have been regarding bubble as a disorder in prices. However, this research strategy has overlooked an…
Episodes of market crashes have fascinated economists for centuries. Although many academics, practitioners and policy makers have studied questions related to collapsing asset price bubbles, there is little consensus yet about their causes…
Rational pure bubble models feature multiple (and often a continuum of) equilibria, which makes model predictions and policy analyses non-robust. We show that when the interest rate in the fundamental equilibrium is below the economic…
We define a financial bubble as a period of unsustainable growth, when the price of an asset increases ever more quickly, in a series of accelerating phases of corrections and rebounds. More technically, during a bubble phase, the price…
We represent the functioning of the housing market and study the relation between income segregation, income inequality and house prices by introducing a spatial Agent-Based Model (ABM). Differently from traditional models in urban…
House price increases have been steady over much of the last 40 years, but there have been occasional declines, most notably in the recent housing bust that started around 2007, on the heels of the preceding housing bubble. We introduce a…
We consider a simple stochastic model of a urban rental housing market, in which the interaction of tenants and landlords induces rent fluctuations. We simulate the model numerically and measure the equilibrium rent distribution, which is…
A rational bubble is a situation in which the asset price exceeds its fundamental value defined by the present discounted value of dividends in a rational equilibrium model. We discuss the recent development of the theory of rational…
This paper develops a dynamic equilibrium model where agents exhibit a strong form of belief heterogeneity: they disagree about zero probability events. It is shown that, somewhat surprisingly, equilibrium exists in this setting, and that…
Historical trends suggest the decline in importance of land as a production factor but its continued importance as a store of value. Using an overlapping generations model with land and aggregate uncertainty, we theoretically study the…
We investigate the parameter space of hybrid inflation models where inflation terminates via a first-order phase transition causing nucleation of bubbles. Such models experience a tension from the need to ensure nearly scale invariant…
The optimal (`equilibrium') macroscopic properties of an economy with $N$ industries endowed with different technologies, $P$ commodities and one consumer are derived in the limit $N\to\infty$ with $n=N/P$ fixed using the replica method.…