Nonlinear delay difference equations for housing dynamics assuming heterogeneous backward-looking expectations
Other Titles
異質預期條件下房價波動非線性延滯差分方程
Author(s)
Author(s)
Xu, J.-N.
Tsui, W. S.
Date Issued
2007
Publisher
Springer
Journal
Applied Mathematics and Mechanics
Volume
28
Issue
6
Start page
785
End page
798
Abstract
China’s first interest rate hike during the last decade, aiming to cool down the seemingly overheated real estate market, had aroused more caution on housing market. This paper aims to analyze the housing price dynamics after an unanticipated economic shock, which was believed to have similar properties with the backward-looking expectation models. The analysis of the housing price dynamics is based on the cobweb model with a simple user cost affected demand and a stock-flow supply assumption. Several nth-order delay rational difference equations are set up to illustrate the properties of housing dynamics phenomena, such as the equilibrium or oscillations, overshoot or undershoot and convergent or divergent, for a kind of heterogeneous backward-looking expectation models. The results show that demand elasticity is less than supply elasticity is not a necessary condition for the occurrence of oscillation. The housing price dynamics will vary substantially with the heterogeneous backward-looking expectation assumption and some other endogenous factors.
SFU Affiliated Publication
No
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