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House Prices and Monetary Policy in Colombia

Martha López

Borradores de Economia from Banco de la Republica de Colombia

Abstract: This paper investigates the possible responses of an inflation-targeting monetary policy in the face of asset price deviations from fundamental values. Focusing on the housing sector of the Colombian economy, we consider a general equilibrium model with frictions in credit market and bubbles in housing prices. We show that monetary policy is less efficient when it responds directly to asset price of housing than a policy that reacts only to deviations of expected inflation (CPI) from target. Some prudential regulation may provide a better outcome in terms of output and inflation variability.

Keywords: House price bubbles; interest rate rules; monetary policy; inflation Targeting. (search for similar items in EconPapers)
JEL-codes: E32 E40 E47 E52 (search for similar items in EconPapers)
Date: 2006-02
New Economics Papers: this item is included in nep-fmk, nep-mac, nep-mon and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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https://doi.org/10.32468/be.372 (application/pdf)

Related works:
Journal Article: House Prices and Monetary Policy in Colombia (2006) Downloads
Journal Article: House Prices and Monetary Policy in Colombia (2006) Downloads
Working Paper: House Prices and Monetary Policy in Colombia (2006) Downloads
Working Paper: House Prices and Monetary Policy in Colombia (2005) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:bdr:borrec:372

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