House Prices and Monetary Policy

Paulo Brito (), Giancarlo Marini and Alessandro Piergallini

MPRA Paper from University Library of Munich, Germany

Abstract: This paper analyzes global dynamics in an overlapping generations general equilibrium model with housing-wealth effects. It demonstrates that monetary policy cannot burst rational bubbles in the housing market. Under monetary policy rules of the Taylor-type, there exist global self-fulfilling paths of house prices along a heteroclinic orbit connecting multiple equilibria. From bifurcation analysis, the orbit features a boom (bust) in house prices when monetary policy is more (less) active. The paper also proves that booms or busts cannot be ruled out by interest-rate feedback rules responding to both inflation and house prices.

Keywords: House Prices; Housing-Wealth Effects; Monetary Policy Rules; Equilibrium Dynamics; Global Determinacy; Heteroclinic Orbits. (search for similar items in EconPapers)
JEL-codes: C61 C62 E31 E52 (search for similar items in EconPapers)
Date: 2016-01-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: House prices and monetary policy (2016)
Working Paper: House Prices and Monetary Policy (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:89577

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