1. ‘Perfect’ Real Estate Liquidity and Adjustment Paths to Long-run Equilibrium June 14, 2012 By Noriko Ashiya Faculty of Real Estate Science, Meikai University European Real Estate Society Conference 2012, June 13 – 16th, 2012 in Edinburgh

2. purpose of this paper formulate an example of the international macro economic climate with ‘perfect’ real estate liquidity identify the crucial implications brought by such extreme degrees of real estate liquidity or ‘financial’ real estate. European Real Estate Society Conference 2012, June 13 – 16th, 2012 in Edinburgh

3. method of analysis extend the traditional Keynesian international macroeconomic model, revisited and modified in the study of Branson and Buiter (1983) construct a simple analytical framework with perfect/extreme degrees of Real estate liquidity European Real Estate Society Conference 2012, June 13 – 16th, 2012 in Edinburgh

4. findings after the increase in the foreign interest rate, real estate liquidity may help reduce the fluctuations of home output along an adjustment path between one equilibrium position and another. i.e., Real estate liquidity serve as a buffer against influences from foreign countries although within the setting of a theoretical perfect market. European Real Estate Society Conference 2012, June 13 – 16th, 2012 in Edinburgh

5. traditional Keynesian model Not have a focus on ‘perfect’ real estate liquidity Rosengren (2010) pointed out: (1) the need for better understanding of the links between financial intermediaries, financial markets, and the real economy. (2) those financial links to the real economy are only crudely incorporated into most macroeconomic modeling. European Real Estate Society Conference 2012, June 13 – 16th, 2012 in Edinburgh

6. the model in this paper assumes ‘perfect’ real estate liquidity i.e., classifies real estate as a financial asset, not as a real asset. includes liquidized real estate, denoted by LRE, in the asset menu as: European Real Estate Society Conference 2012, June 13 – 16th, 2012 in Edinburgh Equation (1)

7. Note that, the assumption of perfect real estate liquidity will overstate the case i.e., all real estate in the system is perfectly securitized and thereby exists as a securitization product in a financial asset portfolio. but makes it possible to formulate the simplest example of the recent international macro economic climate with expanded securitization markets European Real Estate Society Conference 2012, June 13 – 16th, 2012 in Edinburgh

8. Definitions of equilibriums (1): SHORT-RUN FLOW EQUILIBRIUM defined by the IS-LM equilibrium conditions. European Real Estate Society Conference 2012, June 13 – 16th, 2012 in Edinburgh LM curve: Equation (4) IS curve: Equation(5)

9. Definitions of equilibriums (2): LONG-RUN STOCK EQUILIBRIUM defined by the IS-LM equilibrium plus current account balance. European Real Estate Society Conference 2012, June 13 – 16th, 2012 in Edinburgh LM curve: Equation (8) IS curve: Equation (9) BP curve: Equation (10)

10. SHORT-RUN EFFECTS the right-hand side of Equation (16) expresses the boundary value, Bs, which determines the indicators of the foreign interest rate hike results. European Real Estate Society Conference 2012, June 13 – 16th, 2012 in Edinburgh Equation (16)

11. LONG-RUN EFFECTS the right-hand side of Equation (22) expresses the boundary value, B L, which determines the indicators of the foreign interest rate hike results. European Real Estate Society Conference 2012, June 13 – 16th, 2012 in Edinburgh Equation (22)

12. List of symbols European Real Estate Society Conference 2012, June 13 – 16th, 2012 in Edinburgh

13. LINK BETWEEN THE SHORT-RUN AND LONG-RUN EFFECTS (1) visualized link European Real Estate Society Conference 2012, June 13 – 16th, 2012 in Edinburgh

14. LINK BETWEEN THE SHORT-RUN AND LONG-RUN EFFECTS (2) The role of LRE European Real Estate Society Conference 2012, June 13 – 16th, 2012 in Edinburgh

15. Summary: ADJUSTMENT PATHS TO LONG-RUN EQUILIBRIUM European Real Estate Society Conference 2012, June 13 – 16th, 2012 in Edinburgh

16. CONCLUSIONS real estate liquidity may serve as a buffer against influences from foreign countries without real estate liquidity, the positive foreign interest rate effect in the short-run would be reversed in the long-run. the patterns of fluctuations of home output along an adjustment path towards long-run equilibrium would be (1) stable under ‘perfect’ real estate liquidity (2) unstable under real estate non-liquidity. European Real Estate Society Conference 2012, June 13 – 16th, 2012 in Edinburgh

17. ‘Perfect’ Real Estate Liquidity and Adjustment Paths to Long-run Equilibrium June 14, 2012 By Noriko Ashiya Faculty of Real Estate Science, Meikai University Thank you very much indeed! European Real Estate Society Conference 2012, June 13 – 16th, 2012 in Edinburgh