Federal Reserve policy and housing: A goal too far

Thomas F. Cargill and Mark Pingle

Economic Analysis and Policy, 2019, vol. 62, issue C, 150-158

Abstract: Multiple goals tend to conflict, and this is true for multiple monetary policy goals. We present evidence that the Federal Reserve has responded to the general political support for homeownership and affordable housing in the U.S. by conducting monetary policy favorable to housing. When combined with insufficient recognition of financial innovations and flaws in the financial system, the addition of the goal of supporting housing has been “one goal too far,” creating economic distress more so than relieving it. We present evidence that it significantly contributed to the Great Inflation and the Great Recession. This work highlights the potential for government failure when a central bank makes discretionary choices with too many policy targets.

Keywords: Federal Reserve; Financial regulation; Housing; Credit; Price stability (search for similar items in EconPapers)
JEL-codes: E5 E52 E58 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:62:y:2019:i:c:p:150-158

DOI: 10.1016/j.eap.2019.01.008

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