Self-Fulfilling Risk, Land Price and Macroeconomic Fluctuations

Speaker：XU Sichuang  (Chinese University of Hongkong (Shenzhen)，Assistant Professor）

Host：LIU Yuelin（Assistant Professor, Lingnan College）

Time and Date：16：00—18：00, May 21, 2021

Venue：Ip. P. Ting Conference Room, Lingnan Hall

Abstract:  

The collapse of real estate price during the 2008 financial crisis is accompanied by a sharp surge in measured uncertainty. In this paper, we propose a tractable macroeconomic framework, linking uncertainty, housing price and the real economy. In the model, fluctuations in real estate price originating from changing perceptions about uncertainty transmit and propagate to the macroeconomy, generating boom-bust cycles. Our framework features self-fulfilling risk spike in the housing market, and is able to generate large volatility in price-rent rate as well as strong co-movement between housing price and macroeconomic aggregates. Quantitative exercise suggests risk panic is a leading driver of business-cycle fluctuations despite the presence of various competing structural shocks.

Profile of the Speaker:

Dr. Sichuang Xu is an Assistant Professor of Economics in The Chinese University of Hong Kong, Shenzhen. He received his B.A in Finance from Sun Yat-sen University and his Ph.D. from Hong Kong University of Science and Technology. His research interests are macroeconomics, financial economics and international economics.