A Model of the Canadian Housing and Mortgage Markets.

As a consequence of the importance and growing concern about housing in America, a large number of studies of the mortgage market and the residential construction sector of the economy have recently been undertaken. These studies have been primarily designed to examine particular aspects of these markets, such as the relationship between residential construction cycles and the availability of credit (Smith 1958, Break 1961, Guttentag 1961, Alberts 1962), the nature of financial institution mortgage lending (Klaman 1961, Poapst 1962, Huang 1966, Smith 1967a, Sparks 1967a), the magnitude of the stock elasticities of housing demand with respect to price and income (Duesenberry and Kistin 1952, Reid 1958, Muth 1960, Lee 1964, Oksanen 1966), and the determinants of housing starts (Grebler and Maisel 1963, Maisel 1963). The purpose of this paper is to utilize these specific studies to develop a complete housing and mortgage market model for Canada, with particular emphasis placed upon the role of financial variables.[1] The purpose of this paper is to provide a rigorous demonstration that a demand-for-money function of the type proposed by Friedman can be derived directly from the hypothesis that the services of money at each point in time enter as arguments into the household's intertemporal utility function. This paper has sought to demonstrate that a demand-for-money function may be derived directly from an intertemporal utility function. It shows that a consumer, seeking to maximize utility over time, will reach a moving equilibrium in which the time path of money balances is determined simultaneously with that of consumption of commodity services. It has also been demonstrated that under given assumptions these demand functions possess the usual neoclassical properties. The permanent income hypothesis of consumption frequently is cited as a theoretical explanation of the observed instability of the relation between current income and current consumption. ... [ABSTRACT FROM AUTHOR]