Eres : Digital Library : Works

Paper eres2009_152:
Residential Investment and Interest Rate: A Nonlinear Analysis in Sweden

id eres2009_152
authors Yang, Zan
year 2009
title Residential Investment and Interest Rate: A Nonlinear Analysis in Sweden
source 16th Annual European Real Estate Society Conference in Stockholm, Sweden
summary In the traditional model, an increase of interest rate will lead to a decreasing investment level because of decreasing net present values of investment projects. However, when the impact of uncertainty in the presence of irreversibility is considered, the value of waiting is introduced to the model. The investor has “option” to delay an investment decision in order to wait the arrival of new information about market condition. The effect of interest rate on investment could be nonlinear depending on the value of the real options. In this study, I empirically examine the nonlinear effect of interest rate on investment in the Swedish housing market. Markov – Switching regression is used to characterize time – varying parameters of an error – correction model for housing investment. It models a nonlinear regime – switching phenomenon to characterize housing investment dynamics within regimes and during the transition between regimes in response to the interest rate volatility.
series ERES:conference
email zanyang@tsinghua.edu.cn
content file.ppt (502,272 bytes)
discussion No discussions. Post discussion ...
ratings
session Housing
last changed 2009/09/16 16:22
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