Did the FED Inflate a Housing Price Bubble? A Cointegration Analysis between the 1980s and the 1990s

Clemente De Lucia
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Clemente De Lucia: BNP Paribas, Paris, France

No 82, ISAE Working Papers from ISTAT - Italian National Institute of Statistics - (Rome, ITALY)

Abstract: The aim of this work is to verify if the recent episodes of expansionary policies followed by the FED contributed to the creation a housing price bubble. This study compares two different samples, both including periods of recession followed by accommodating monetary policies. The paper showed that even though the long-run relationship between inflation and the interest rate did not change along the whole sample, suggesting an unaltered behavior of the central bank with respect to changes in inflation, the reactivity of housing prices to monetary policy has considerably augmented during the 1990s compared to the 1980s. This is interpreted as evidence that prolonged accommodating monetary policies affected the US real estate market.

Keywords: Housing Price Bubble; Monetary Policy; Cointegration (search for similar items in EconPapers)
JEL-codes: E31 E41 E52 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2007-05
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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