Asset Price Spillover,Collateral and Crises: with an Application to Property Market Policy |
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Authors: | Nan-Kuang Chen Charles Ka Yui Leung |
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Institution: | (1) Department of Economics, National Taiwan University, 21 Hsu Chow Road, Taipei, 10021, Taiwan;(2) Department of Economics and Finance, City University of Hong Kong, Kowloon Tong, Hong Kong |
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Abstract: | This paper studies the impact of land supply elasticity and land use regulation. For sufficiently adverse shocks constrained
entrepreneurs liquidate their assets for debt repayment. This effect can spillover to the residential property market. A crisis
occurs when households are forced to default on their mortgages as well. While both converting costs and land use regulation
tend to magnify the effect of adverse shock, the former generates an asymmetric effect between a positive and a negative shock
on the land market, and the latter tends to raise the likelihood of a crisis, by raising the threshold value of liquidation.
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Keywords: | Asset prices Crisis Property market policy Real estate markets Spillover |
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