Low Interest Rates and Housing Bubbles: Still No Smoking Gun

Kenneth Kuttner

No 2012-01, Department of Economics Working Papers from Department of Economics, Williams College

Abstract: This paper revisits the relationship between interest rates and house prices. Surveying a number of recent studies and bringing to bear some new evidence on the question, this paper argues that in the data, the impact of interest rates on house prices appears to be quite modest. Specifically, the estimated effects are uniformly smaller than those implied by the conventional user cost theory of house prices, and they are too small to explain the previous decade's real estate boom in the U.S. and elsewhere. However in some countries, there does appear to have been a link between the rapid expansion of the monetary base and growth in house prices and housing credit.

JEL-codes: E44 E52 E65 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2012-01
New Economics Papers: this item is included in nep-cba, nep-mac and nep-ure
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Chapter: Low Interest Rates and Housing Bubbles: Still No Smoking Gun (2013)
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