Interest rates and house prices: pill or poison?

Oscar Jorda, Moritz Schularick and Alan Taylor

FRBSF Economic Letter, 2015

Abstract: Policymakers disagree over whether central banks should use interest rates to curb leverage and asset price booms. Higher interest rates make mortgages more expensive and could prevent borrowers from bidding up house prices to create a boom. However, rough calculations show that the size of rate increase needed to do so might also boost unemployment and push down inflation. Thus, using this type of policy tool may cause the central bank to deviate significantly from its goals of full employment and price stability.

Keywords: Housing - Prices; Interest rates (search for similar items in EconPapers)
Date: 2015
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