Handbook of Real Estate and Macroeconomics


Handbook of Real Estate and Macroeconomics

9781789908480 Edward Elgar Publishing
Edited by Charles Ka Yui Leung, Department of Economics and Finance, City University of Hong Kong, Kowloon Tong, Hong Kong
Publication Date: 2022 ISBN: 978 1 78990 848 0 Extent: 480 pp
This Handbook collects a set of academic and accessible chapters to address three questions: What should real estate economists know about macroeconomics? What should macroeconomists know about real estate? What should readers know about the interaction between real estate and macroeconomics?

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This Handbook collects a set of academic and accessible chapters to address three questions: What should real estate economists know about macroeconomics? What should macroeconomists know about real estate? What should readers know about the interaction between real estate and macroeconomics?

Content is focused on four widely discussed themes: real estate-related wealth and macroeconomics, housing price dynamics and affordability, financial crises and structural change, and non-residential real estate. The chapter authors, active researchers from around the world, present evidence from various countries and datasets that are of interest to audiences across the globe, summarize insights from previous research and shed light on current issues.

The Handbook of Real Estate and Macroeconomics assists researchers on the big picture as well as a hot spots in frontier research, and facilitates worldwide policy discussions and analysis for practitioners in financial markets, corporate economists, and policy analysts in governments and NGOs.
Critical Acclaim
‘Housing is distinct among goods by virtue of its importance in expenditure and welfare, its durability, and its ability to locate and identify its consumer to others (including the government). As a result, the economics of housing is central to many literatures. These include the role of fluctuations in housing construction and prices in business cycles, housing’s impact on financial markets via its role as a store of value and easily collateralized good, and the treatment of housing as a basis for taxation and distribution of government services, especially government produced education. The papers in this Handbook volume span these topics as well as many others. While providing fresh results and insights, the papers also provide a terrific portal to researchers, especially graduate students, considering working in any of these areas.’ 
– Mark Bils, University of Rochester, US

‘This is an excellent resource for researchers, policymakers, and market practitioners interested in the economics of housing. The Editor, Professor Charles Leung, is a noted figure in the area. He has put together a superb collection of papers covering topics such as the affordability of housing, commercial real estate, and the financial crisis, among other things. The chapters discuss housing in various countries and provide some cross-country comparisons.’
– Jeremy Greenwood, University of Pennsylvania, US

‘An invaluable resource for those interested in one of the hottest areas in economics, the macroeconomics of real estate and household finance.’
– Robert G. King, Boston University and NBER, US

‘The mid-2000s Great Financial Crisis was a reminder to macroeconomists that models which omitted explicit analysis of the economy’s largest tangible asset, an asset that underpins large parts of the financial system, can miss much of what is happening outside the model, in the actual economy. On the flip side, the GFC reminded housing economists of the need to deepen understanding of spillovers from housing to the macroeconomy and financial markets, and other settings such as labor markets and environmental conditions. The SARS-CoV-2 pandemic has focused economists of every stripe on epidemiology and public health, but housing markets are also once again brought to the fore, as concerns mount about foreclosures, evictions, and distortions in rents and asset prices directly from the pandemic and less directly from the responses to it.

Anyone seeking understanding of previous episodes, or looking for insight into the present, or the next crisis, will profit from repeated consultation with this Handbook. The volume gathers a distinguished group of scholars from around the world, and provides a state-of-the-art review of linkages between housing economics and the aggregate economy and its major constituent markets. Individual chapters provide reviews of the latest modeling tools as well as case studies, in a wide range of international settings, at different levels of income and urbanization. Highly recommended.’
– Stephen Malpezzi, University of Wisconsin, Madison, US

‘This book gathers a great collection of papers on real estate that contains valuable insights for both academics and practitioners.’
– Sergio Rebelo, Northwestern University, US
Sumit Agarwal
Sumit Agarwal is Low Tuck Kwong Distinguished Professor of Finance at the Business School and a Professor of Economics and Real Estate at the National University of Singapore. In the past, he has held positions as Professor of Finance at the Business School, Georgetown University, senior financial economist with the Federal Reserve Bank of Chicago and senior vice president with the Bank of America. Dr. Agarwal’s research interests include financial institutions, household finance, behavioral finance, real estate markets and sustainability. He has published over one hundred research articles in journals like the American Economic Review, Quarterly Journal of Economics, Journal of Political Economy, Review of Economic Studies, Journal of Finance, Journal of Financial Economics, and Review of Financial Studies. He has co-written three books, co-edited two collected volumes, been featured on the BBC, CNBC, and Fox, and cited in the Wall Street Journal, The New York Times, and The Economist.

Christophe André
Christophe André is a senior economist at the Organization for Economic Cooperation and Development (OECD) in Paris, which he joined in 1997. He has been involved in studies of the organization on many topics, including macroeconomic analysis, modelling and forecasting, fiscal and monetary policy, as well as housing and health economics. He has contributed to several editions of the OECD Economic Outlook, the organization’s flagship macroeconomic publication. Since 2010, he has taken part in OECD Economic Surveys on Finland, Korea, Sweden and the United Kingdom. He now heads the Korea-Sweden desk in the OECD Economics Department. He has also co-authored research articles in journals and book chapters, notably on housing market analysis and related policy issues.

Prasad Sankar Bhattacharya
Prasad Sankar Bhattacharya is a Senior Lecturer in Economics at Department of Economics, Deakin University, Australia. Prasad’s current research is concentrated on economic development and political economy topics involving domestic conflict, civil war and land reform. In his research, Prasad analyzed various facets of land reforms, their political connotations and subsequent impact on growth. At present, Prasad is using regional and within-country archival & census data to investigate finer nuances of domestic conflict focusing on topics like land reform, inequality, financial development and ethnic distance. Additionally, he is investigating the long-run impact of Indian partition on social cohesion and trust formation. In his earlier research, Prasad used time series data to analyze fiscal policy effectiveness, Phillips curve estimation and forecasting performance with novel techniques.

Kuang-Liang Chang
Dr. Kuang-Liang Chang is a Professor in the Department of Political Economy at National Sun Yat-San University in Taiwan. He received his Ph.D. degree in Economics from National Taiwan University in Taiwan. His main research interests are macroeconomics, real estate economics and finance, applied econometrics, and time series analysis. He has published in many international journals, including Computational Economics, Economic Modelling, Energy Economics, Finance Research Letters, International Review of Economics and Finance, Journal of Macroeconomics, Japan and the World Economy, Journal of Real Estate Finance and Economics, Quantitative Finance, Regional Science and Urban Economics, The Manchester School, etc.

Shihe Fu
Shihe Fu is Professor of Economics at Xiamen University, China. His research areas are urban economics, labor economics, and environmental economics. His publications have appeared in refereed journals such as The Economic Journal, Review of Economics and Statistics, Journal of Public Economics, Journal of Labor Economics, Journal of Environmental Economics and Management, and Journal of Urban Economics. He received his Ph.D. in Economics from Boston College in 2005.

Eric Girardin
Dr. Eric Girardin is a Professor of Economics at Aix-Marseille University’s School of Economic, Aix-Marseille University, France, and visiting professor at HSBC-Peking University Business School (UK campus). He obtained economics Master degrees at Universities of Paris-Panthéon-Sorbonne and Cambridge (UK), and Doctorates in Economics from universities Paris-Panthéon-Sorbonne and Rennes I.
His research, focused on macroeconomic, monetary and financial issues in China and East Asia, including real estate economics. He co-authored Demystifying the Chinese Stock Market (Palgrave Macmillan, 2019). He was a member of the Asian Development Bank Institute’s Advisory Council (2004-2012) and has held visiting research or professorial positions at Bank for International Settlements (Asia-Pacific), Bank of Finland Institute of Transition (BOFIT), Chinese Academy of Social Sciences (Beijing), Fudan University (Shanghai), Hong Kong Institute for Monetary research, and People’s bank of China Graduate School (Beijing).

Richard K. Green
Richard Green is a Professor in the Price School of Public Policy, Marshall School of Business, and Department of Economics at the University of Southern California, where he is also director of the USC Lusk Center for Real Estate. He was also a Senior Advisor for Housing Finance at the Department of Housing and Urban Development, and a Trustee of the Urban Land Institute. He previously was on the faculties of the University of Wisconsin-Madison and The George Washington University.

Rangan Gupta
Rangan Gupta is a Professor at the Department of Economics, University of Pretoria, South Africa. He completed his Ph.D. in May 2005 from the Department of Economics, University of Connecticut, USA. He then joined the Department of Economics, University of Pretoria, as a Senior Lecturer in August 2005. He obtained his B.Sc. (Honours) degree in Economics from the R.K.M.R College, Narendrapur, India, and M.Sc. degree in Economics from the University of Calcutta, India. His academic interests are mainly Monetary Theory and Policy, and Time Series Econometrics, and he has authored and co-authored many articles in peer-reviewed journals and book chapters in these areas of research. He is also associated with multiple journals as associate editor and editorial boards.

Eric Hanushek
Dr. Hanushek is the Paul and Jean Hanna Senior Fellow at the Hoover Institution of Stanford University. He is a recognized leader in the economic analysis of education issues, and his research has had broad influence on education policy in both developed and developing countries. He is the author of numerous widely-cited studies on the effects of class size reduction, school accountability, teacher effectiveness, and other topics. His current research analyzes why some countries’ school systems consistently perform better than others. He has authored or edited twenty-four books along with over 250 articles. He is a Distinguished Graduate of the United States Air Force Academy and completed his Ph.D. in economics at the Massachusetts Institute of Technology.

Takahiro Hattori
Takahiro Hattori is Project Assistant Professor at the Graduate School of Public Policy, the University of Tokyo. Takahiro is also a visiting scholar in Ministry of Finance, Japan. Takahiro holds a PhD from Hitotsubashi University.

Roselyne Joyeux
Dr. Roselyne Joyeux is a Professor in Economics in the Faculty of Business and Economics at Macquarie University in Sydney, Australia. She has held positions at Cornell University, the University of Auckland, and the Centre for Operations Research and Econometrics at the University of Louvain-la-Neuve.
She researches in areas which are highly relevant to the society, economy and industry: energy economics, carbon emission trading, house prices, Chinese stock markets and housing markets. Her recent papers have been published in the Energy Journal, the Journal of Financial Econometrics, the China Economic Review, Economic Modelling, Applied Economics and the Economic Record. She has gained international recognition for her interdisciplinary work and been appointed on the Australian Research Council (ARC) college of experts.

Matthew Kahn
Matthew E. Kahn is the Bloomberg Distinguished Professor of Economics and Business at Johns Hopkins University and the Director of JHU''s 21st Century Cities Initiative . He is a research associate at the National Bureau of Economic Research and a research fellow at IZA. He is the author of Green Cities: Urban Growth and the Environment and the co-author (joint with Dora L. Costa) of Heroes and Cowards: The Social Face of War (Princeton University Press 2009). He is also the author of Climatopolis (Basic Books 2010) and Blue Skies over Beijing: Economic Growth and the Environment in China (joint with Siqi Zheng published by Princeton Press in 2016). He has also published three other Amazon Kindle books on urban economics and microeconomics. His research focuses on urban and environmental economics.

Rose Neng Lai
Rose Neng LAI is Professor in Finance and Dean of Honours College at the University of Macau, and a Life Member of the Clare Hall of the University of Cambridge. Her research in real estate finance and economics, behavioral finance, and risk management has been published in Real Estate Economics (in which one of her coauthored papers won the 2017 Edwin Mills Best Paper Award), Journal of Real Estate Finance and Economics, Journal of Empirical Finance, and others. She is Executive Editor of the International Real Estate Review, Executive Director and past President (2007) of the Asian Real Estate Society, Executive Director and past President (2012) of the Global Chinese Real Estate Congress. She also served as chair and member for many academic and conference advisory boards and committees. She was awarded the 2019 International Real Estate Society Achievement Award.

Charles Ka Yui Leung
Charles Ka Yui Leung is currently an associate professor of the Department of Economics and Finance at the City University of Hong Kong. He received the Fulbright Scholarship (Research) and has been a visiting scholar at both Fisher Center for Real Estate and Urban Economics at Haas School of Business, University of California, Berkeley; Hoover Institution, Stanford University; Department of Real Estate and Urban Land Economics, University of Wisconsin-Madison; ISER, Osaka University. His works appear in academic journals and books, including the Oxford Research Encyclopedia of Economics and Finance. He has served as a guest editor of Journal of Housing Economics, Pacific Economic Review, an editorial board member of several journals. His research can be found in several websites, such as https://ideas.repec.org/e/ple96.html

Cho Yiu Ng
Dr. Joe Ng received his PhD from the City University of Hong Kong. Before receiving his doctoral degree, he received the 2019 Fulbright RGC Hong Kong Research Scholar Award and visited Virginia Tech in the United States. Dr. Ng has published in Economic and Political Studies, Singapore Economic Review, and Oxford Research Encyclopedia of Economics and Finance. His research can be found at: https://orcid.org/0000-0002-8702-2813

Kazuo Ogawa
Kazuo Ogawa has been professor of College of Foreign Studies of Kansaigaidai University since 2017 April. He was professor of the Institute of Social and Economic Research of Osaka University from 1995 April to 2017 March. His research interests include macroeconomics, applied econometrics, empirical analysis of business investment, banks’ lending behavior, and empirical analysis of households’ consumption and savings behavior. Some of his major publications are “Why Commercial Banks Held Excess Reserves: The Japanese Experience of the Late 1990s,” (Journal of Money, Credit, and Banking), Asset Markets and Business Cycle (awarded Nikkei Prize for Excellent Books in Economic Science, in Japanese). He also has many articles published in leading journals on finance theory and the Japanese economy.
He obtained a bachelor’s degree in economics from Kobe University in 1976. He obtained a Ph.D. in economics at the University of Pennsylvania in 1982.

Santiago Pinto
Santiago Pinto is a senior economist and policy advisor in the Research Department. He joined the Federal Reserve Bank of Richmond in 2012 after serving as an associate professor of economics at West Virginia University, where he had worked since 2002.
Pinto earned his doctorate from the University of Illinois at Urbana-Champaign in 2001. His research interests are in the fields of urban and regional economics, public economics, and state and local public finance. His research work has focused on issues related to household mobility, local labor markets, assistance to poor households, and on equality of opportunity. Pinto has also worked on a number of issues related to fiscal competition, including state corporate income taxes and formula apportionment systems, and on urban crime. A different line of Pinto’s research focuses on the political determinants of foreign direct investment and on the information content of diffusion indices.

Timothy Riddiough
Timothy Riddiough holds the James A. Graaskamp Chair and is Professor of Real Estate and Urban Land Economics at the University of Wisconsin–Madison. He is best known for his work on credit risk in mortgage lending, real options, various topics in commercial real estate finance and investment, and land use regulation. Riddiough is a past president of the American Real Estate and Urban Economics Association, and was a long-time managing editor of Real Estate Finance. He has served as a senior advisor to the BIS-Asia on issues of real estate and financial stability, and has consulted for many major banks on issues of mortgage lending and securitization.

Pierre-Daniel Sarte
Pierre-Daniel Sarte is a senior advisor in the Research Department and has been with the Richmond Fed since 1996. His research interests include macroeconomics, with a focus on business cycles, and urban and regional economics.
Sarte''s work has been published in a variety of journals, including the American Economic Review, the Journal of Political Economy, the Review of Economic Studies, the Journal of Public Economics, and the Journal of Monetary Economics. He has taught at the University of Richmond and the University of Virginia and has served as a visiting scholar at the Reserve Bank of New Zealand and the University of Queensland. He currently serves as an associate editor of the Journal of Monetary Economics and has served as a co-editor of Economics Letters.
Sarte holds a doctorate from the University of Rochester, awarded in 1996, and a bachelor''s degree from the University of Toronto.

Xin Sheng
Dr Xin Sheng is a Senior Lecturer at Lord Ashcroft International Business School, Anglia Ruskin University, UK. He completed his Ph.D. from the Department of Accountancy, Economics and Finance, Heriot-Watt University, UK. Dr Xin Sheng’s research interests mainly include Applied Economics, Energy Economics, Real Estate Economics, Finance and Investment, and Asset Pricing.

Jyoti Shukla
Dr Jyoti Shukla is a Lecturer in Property at the University of Melbourne. Issues related to housing and land economics are of prime interest to her and most of her publications are in related fields. 
Jyoti’s doctoral research aims at designing a fairer mechanism for the compulsory acquisition of land. In this research Jyoti re-examines the nature of losses of landowners, through the lens of economic theory of ‘capability’ and identifies valuable ‘functionings’ of land which should be satisfactorily reconstructed or replaced to enable the landowner to resume her original condition (prior to acquisition). Jyoti’s research argues for two-stage improvement in the existing mechanism through procedural developments and comprehensive compensation strategies. As a natural expansion of her doctoral research Jyoti is currently focusing on designing a ‘resilient compensation mechanism’ for those who are struck by natural and man-made disasters. 

Weizeng Sun
Weizeng Sun is an associate professor at the School of Economics, Central University of Finance and Economics, China. His field of specialization is urban economics and real estate economics. His research interests include place-based policy, transportation infrastructure, air pollution, etc. He has published in such journals as Journal of Urban Economics, Regional Science and Urban Economics, Journal of Regional Science, Real Estate Economics, Journal of Real Estate Finance and Economics.

Piyush Tiwari
Dr Piyush Tiwari is Professor of Property at University of Melbourne, Australia. His research interests include housing economics and mortgages, build to rent, commercial real estate investment, and financing infrastructure in developing countries. He is Member, Royal Institution of Chartered Surveyors (RICS) and Fellow, Applied Property Development Institute. He is also Member, International Land Measurement Standards Committee of International Land Measurement Standards Coalition. Earlier he served as Member, International Property Measurement Standards Committee of International Property Measurement Standards Coalition, His other professional activities include Director and Fellow, Asian Real Estate Society, Associate Editor, International Real Estate Review, Editorial Board, Property Management and Editorial Board, Land.

Reneé Van Eyden
Reneé Van Eyden is a Professor at the Department of Economics, University of Pretoria, South Africa. She holds a Ph.D. in Economics, MBA and B.Sc. (Honours) in Computers Science from the University of Pretoria. Her area of research includes Macroeconomic Development and Applied Econometrics. She has served as secretary of the African Econometric Society and has been appointed to Skills Development Projects of the United Nations (Project Link), the German Agency GIZ, Economic Research Southern Africa, and South African Reserve Bank. She has authored and co-authored numerous articles in international peer-reviewed journals.

Robert Van Order
Robert Van Order holds the Oliver Carr Chair in Finance and Real Estate at George Washington University, and is Professor of Finance and Economics. He was Chief Economist at Freddie Mac from1987 until 2002. He has taught at Purdue, USC, UCLA, Penn, Michigan and Aberdeen Universities, and worked at the Department of Housing and Urban Development and has consulted in Sri Lanka, India, Latvia, Russia, Ghana, Brazil, Egypt, Colombia, Poland and Pakistan. He has published in a range of academic journals, primarily in modeling credit risk, location theory, house prices and financial institutions. He received the George Bloom Distinguished Service Award: American Real Estate and Urban Economics Association in 2007.

Sandeep Varshneya
Sandeep Varshneya is a Finance PhD candidate at NUS Business School, National University of Singapore. His research interests include Corporate Finance, Political Economy and Banking. He possesses over twenty years of work experience in India and the Middle East, and in the course of his diverse career he has worked as a commercial banker, investment banker, for over seven years in a startup involved with infrastructure project consulting, for five years as a full-time volunteer for a Not-for-Profit organization and also been a director on the Board of a startup reinsurance company. Sandeep holds a Post Graduate Diploma in Business Management from XLRI, Jamshedpur in India and a Bachelor of Technology in Mechanical Engineering from Banaras Hindu University, Varanasi, India. He also received his CFA Charter in the year 2008 from the CFA Institute, USA.

V. Brian Viard
V. Brian Viard is Associate Professor of Strategy and Economics at Cheung Kong Graduate School of Business in China. His primary research areas are environmental economics, industrial organization, and economics of competitive strategy. His articles have been published in journals such as The Economic Journal, Journal of Public Economics, The RAND Journal of Economics, Management Science, and Journal of Economic Geography. He also periodically writes online articles applying economic principles to the Chinese economy and business. He received his Ph.D. in Business Economics from The University of Chicago in 2000.

Jianfeng Family Wu
Jianfeng Wu is an associate professor at China Center for Economic Studies (CCES), Fudan University. He studies urban economics & economic geography. He has published several academic papers of urban and regional issues in China, including agglomeration economies, industrial parks, and urban growth. He received his Ph.D. in 2009 from the National University of Singapore and has been at Fudan since then.

Kuzey Yilmaz
Dr. Yilmaz is an associate professor at the department of economics of Cleveland State University. His research develops general equilibrium models to analyze individual decision making and uses those models to study issues in the finance of schools. His work has appeared in leading journals, including Journal of Human Capital, Journal of Monetary Economics, and American Journal of Political Science. He completed his Ph.D. in economics at the University of Rochester.

Jiro Yoshida
Jiro Yoshida is Associate Professor of Business (with tenure) at the Pennsylvania State University and Guest Associate Professor of Economics at the University of Tokyo. Jiro is also a Research Associate at Columbia University, Board Director of the American Real Estate and Urban Economics Association, Board Director of Asian Real Estate Society, Fellow of the Homer Hoyt Institute, and Senior Fellow of the Ministry of Finance of Japan. His research on real estate and macroeconomics is published in Journal of Finance, Review of Economics and Statistics, and Real Estate Economics. He is also an Associate Editor of Frontiers in Built Environment and an Editorial Board Member of Real Estate Economics. He is the recipient of the 2007 AREUEA Dissertation Award and Fulbright Scholarship. Jiro holds a Bachelor of Engineering from the University of Tokyo, an MS from MIT, and an MS and PhD from University of California, Berkeley.

Siqi Zheng
Siqi Zheng is the STL Champion Professor of Urban and Real Estate Sustainability at the Center for Real Estate, and Department of Urban Studies and Planning at Massachusetts Institute of Technology (MIT). She currently serves as the faculty director of the MIT Center for Real Estate. She established MIT Sustainable Urbanization Lab in 2019, and is the faculty director of her Lab. Prof. Zheng’s field of specialization is urban and environmental economics and policy, including environmental sustainability, and place-based policies and self-sustaining urban growth.


Introduction to the Handbook of Real Estate and Macroeconomics x
Charles Ka Yui Leung

1 Real estate market and consumption: macro and micro evidence of Japan 2
Kazuo Ogawa
2 The Bank of Japan as a real estate tycoon: large-scale REIT purchases 21
Takahiro Hattori and Jiro Yoshida
3 Land and macroeconomics 39
Prasad Sankar Bhattacharya

4 Affordable housing conundrum in India 83
Piyush Tiwari and Jyoti Shukla
5 Residential location and education in the United States 106
Eric A. Hanushek and Kuzey Yilmaz
6 Testing for real estate bubbles 137
Eric Girardin and Roselyne Joyeux
7 Disaggregating house price dynamics 165
Rose Neng Lai and Robert A. Van Order
8 The effect of macroeconomic uncertainty on housing returns and
volatility: evidence from US state-level data 206
Reneé van Eyden, Rangan Gupta, Christophe André and Xin Sheng

9 Financial crisis and the U.S. mortgage markets – a review 240
Sumit Agarwal and Sandeep Varshneya
10 Is housing still the business cycle? Perhaps not. 269
Richard K. Green
11 International macroeconomic aspect of housing 284
Joe Cho Yiu Ng
12 How did the asset markets change after the Global Financial Crisis? 312
Kuang-Liang Chang and Charles Ka Yui Leung

13 From the regional economy to the macroeconomy 338
Santiago M. Pinto and Pierre-Daniel G. Sarte
14 Industrial parks and urban growth: a political economy story in China 359
Matthew E. Kahn, Jianfeng Wu, Weizeng Sun and Siqi Zheng
15 Pension funds and private equity real estate: history, performance,
pathologies, risks 371
Timothy J. Riddiough
16 A mayor’s perspective on tackling air pollution 413
Shihe Fu and V. Brian Viard

Index 438
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