House prices and the stance of monetary policy

Marek Jarociński and Frank Rafael Smets

No 891, Working Paper Series from European Central Bank

Abstract: This paper estimates a Bayesian VAR for the US economy which includes a housing sector and addresses the following questions. Can developments in the housing sector be explained on the basis of developments in real and nominal GDP and interest rates? What are the effects of housing demand shocks on the economy? How does monetary policy affect the housing market? What are the implications of house price developments for the stance of monetary policy? Regarding the latter question, we implement a version of a Monetary Conditions Index (MCI) due to Céspedes et al. (2006). JEL Classification: E3-E4.

Keywords: House prices; monetary conditions index; Bayesian VAR; monetary policy shock; conditional forecast. (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-ure
Date: 2008-04
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