Real estate, the external finance premium and business investment: A quantitative dynamic general equilibrium analysis

Yi Jin, Charles Ka Yui Leung, Zhixiong Zeng

Research output: Contribution to journalArticleResearchpeer-review

24 Citations (Scopus)


This article studies the connection between the capital market and the real estate market. Empirically, we find that positive real house price shocks lower the external finance premium and stimulate nonresidential investment and real gross domestic product (GDP). Our theoretical framework is able to mimic the volatility of the external finance premium, the relative price of real estate and capital and the investment in real estate and capital. It also captures the cyclicality of the external finance premium and of real estate prices. The contribution of real estate price fluctuations to the variability of the external finance premium and the GDP is confirmed to be significant.
Original languageEnglish
Pages (from-to)167 - 195
Number of pages29
JournalReal Estate Economics
Issue number1
Publication statusPublished - 2012

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