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Working papers

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Working papers


Rational housing demand bubble

Lise Clain-Chamosset-Yvrard, Xavier Raurich, Thomas Seegmuller, Working paper GATE 2022-07
We provide a unified framework with demand for housing over the life cycle and financial frictions to analyze the existence and macroeconomic effects of rational housing bubbles. We distinguish a housing price bubble, defined as the difference between the housing market price and its fundamental value, from a housing demand bubble, which corresponds to a situation where a pure speculative housing demand exists. In an overlapping generation exchange economy, we show that no housing price bubble occurs. However, a housing demand bubble may occur, generating a boom in housing prices and a drop in the interest rate, when households face a binding borrowing constraint. Multiplicity of steady states and endogenous fluctuations can occur when credit market imperfections are moderate. These fluctuations involve transitions between equilibria with and without a housing demand bubble that generate large fluctuations in housing prices consistent with observed patterns. We finally extend the basic framework to a production economy and we show that a housing demand bubble increases the housing price, housing price to income ratio and economic growth.

Municipalities’ budgetary response to natural disasters

Carla Morvan, Working paper GATE 2022-06
The objective of this study is to analyze the causal impact of natural disasters on municipal budget choices, using a original database that allows us to study a sample of several thousand municipalities, 22,972 of which were affected by a natural disaster between 2000 and 2019. This quasi-experimental setting allows us to use panel regression models to estimate municipalities’ responses to a shock and with respect to their prevention strategies. We find evidence of increased spending for about 10 years after the disaster, together with increased in revenues and debt. Furthermore, it appears that prevention allows municipalities to effectively mitigate the effect of the disaster in terms of public spending, as municipalities with a natural hazard prevention plan in place did not increase their spending and their debt in the long run.