Monetary Policy, Capital Inflows, and the Housing Boom

Filipa Sá and Tomasz Wieladek

Cambridge Working Papers in Economics from Faculty of Economics, University of Cambridge

Abstract: We estimate an open economy VAR model to quantify the effect of monetary policy and capital inflows shocks on the US housing market. The shocks are identified with sign restrictions derived from a standard DSGE model. We find that monetary policy shocks have a limited effect on house prices and residential investment. In contrast, capital inflows shocks driven by an increase in foreign savings have a positive and persistent effect on both housing variables. Other sources of capital inflows shocks, such as foreign monetary expansion or an increase in aggregate demand in the US, have a more limited role.

Keywords: House prices; capital inflows; monetary policy (search for similar items in EconPapers)
JEL-codes: E5 F3 (search for similar items in EconPapers)
Date: 2011-05-30
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac, nep-mon and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Monetary policy, capital inflows, and the housing boom (2011)
Working Paper: Monetary policy, capital inflows and the housing boom (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:cam:camdae:1141

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