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Monetary policy and US housing expansions: The case of time-varying supply elasticities

Bruno Albuquerque (), Martin Iseringhausen and Frederic Opitz ()

Economics Letters, 2020, vol. 195, issue C

Abstract: We challenge the assumption in the literature of constant housing supply elasticities across housing expansions. Using a time-varying parameter (TVP)-VAR model on monthly US data since the early 1990s, we find that the response of housing supply to an expansionary monetary policy shock relative to the response of house prices has declined substantially since the Great Financial Crisis (GFC). Our findings are consistent with research suggesting that land-use regulation has tightened. Absent major reversions in regulation, our results point to a post-COVID-19 housing recovery characterised by a sluggish response of housebuilding to demand, but a relatively stronger response of house prices.

Keywords: House prices; Housing supply; Monetary policy; Housing expansions; Time-varying parameter VAR (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:195:y:2020:i:c:s0165176520302895

DOI: 10.1016/j.econlet.2020.109471

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