Regionally heterogeneous housing cycles and housing market stabilization policies: Evidence from Korea

초록

Housing cycles can vary significantly across regions; this study investigates the macroeconomic implications of regionally heterogeneous housing cycles and stabilization policies. The general equilibrium model includes two separate regions and idiosyncratic shocks in regional housing markets. Simulations suggest that regional housing cycles can be a source of economic inequality between regions by asymmetrically affecting consump-tion, housing service, debt, and welfare. A regional housing boom caused by housing demand shocks improves the welfare of the borrowing agents in the region but reduces the other region's welfare. Conversely, a rise in housing prices caused by a low housing supply decreases the welfare of the agents in the region. Region-specific stabilization policies such as property tax, countercyclical loan-to-value (LTV), and housing supply policies can mitigate regional housing cycles. While the housing supply policy primarily benefits agents in the region that experiences the cycle, the LTV policy harms the welfare of borrowers in the region. The leaning against the wind monetary policy is relatively ineffective in stabilizing regional housing prices.

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