Money Illusion and Housing Frenzies

We benefited from helpful comments from an anonymous referee, Yakov Amihud, Patrick Bolton, Smita Brunnermeier, John Campbell, James Choi, Albina Danilova, Aureo de Paula, Emir Emiray, Will Goetzmann, Kevin Lansing, Chris Mayer, Alex Michaelides, Stefan Nagel, Martin Oehmke, Maureen O'Hara, Filippos Papakonstantinou, Lasse Pedersen, Adriano Rampini, Matt Richardson, Bob Shiller, Matt Spiegel, Jeremy Stein, Demosthenes Tambakis, Haibin Zhu and seminar and conference participants at the Bank of England, Cambridge-Princeton conference, CSEFIGIER symposium, Duke-UNC Asset Pricing Conference, 2006 Econometric Society Winter Meetings in Boston, Federal Reserve Bank of Philadelphia, Harvard University, IIES Stockholm, London Business School, London School of Economics, NBER Behavioral Meetings, Oxford University, Queen-Mary University, RFS Bubble Conference in Indiana, University of Copenhagen, University of Salerno, Wharton School, University of Wisconsin-Madison Real Estate Research conference, and Yale Conference on Behavioral Economics. We also thank the BIS for providing part of the housing data used in this analysis. Brunnermeier acknowledges financial support from the National Science Foundation and the Alfred P. Sloan Foundation. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.