MONETARY POLICY, HOUSING BOOMS, AND FINANCIAL (IM)BALANCES
Sandra Eickmeier and
Boris Hofmann
Macroeconomic Dynamics, 2013, vol. 17, issue 4, 830-860
Abstract:
This paper applies a factor-augmented vector autoregressive model to U.S. data with the aim of analyzing monetary transmission via private sector balance sheets, credit risk spreads, and house prices and of exploring the role of monetary policy in the housing and credit boom prior to the global financial crisis. We find that monetary policy shocks have a persistent effect on house prices, real estate wealth, and private sector debt and a strong short-lived effect on risk spreads in money and mortgage markets. Moreover, the results suggest that monetary policy contributed considerably to the unsustainable precrisis developments in housing and credit markets. Although monetary policy shocks contributed discernibly at a late stage of the boom, feedback effects of other (macroeconomic and financial) shocks via lower policy rates kicked in earlier and appear to have been considerable.
Date: 2013
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Working Paper: Monetary policy, housing booms and financial (im)balances (2010) 
Working Paper: Monetary policy, housing booms and financial (im)balances (2010) 
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Persistent link: https://EconPapers.repec.org/RePEc:cup:macdyn:v:17:y:2013:i:04:p:830-860_00
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