The Sources of Fluctuations in Residential Investment: A View from a Policy-Oriented DSGE Model of the U.S. Economic

This paper analyzes fluctuations in residential investment using an estimated DSGE model of the U.S. economy, which is current used to analyze policy questions and to produce forecasts on a regular basis. Importantly, the model is more detailed in its treatment of domestic spending and production decisions than most other models, allowing consideration of questions related to the housing sector and other macroeconomic developments. Our analysis examines the importance of various structural factors in determining the course of residential investment in the United States over the past two decades. We focus especially on developments in the last ten years, and examine in detail the relationship between monetary policy actions and residential investment within our model.