The Fed’s TRAP

Alexander Erler, Christian Drescher () and Damir Krizanac ()

Journal of Economics and Finance, 2013, vol. 37, issue 1, 136-149

Abstract: The article examines if US monetary policy implicitly responds to asset price booms. Using real-time data and a GMM framework we estimate a Taylor-type rule with an asset variable that captures phases of booms and busts in the real estate market. We identify quasi real-time booms and busts using an asset cycle dating procedure. Our analysis yields two main findings. Firstly, the Fed does implicitly respond to asset price booms in the real estate market. Secondly, these responses are typically pro-cyclic and their intensity changes over time. Copyright Springer Science+Business Media, LLC 2013

Keywords: Federal Reserve; Monetary Policy; Taylor Rule; Asset Price Cycles; Real Estate; E52; E58 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:spr:jecfin:v:37:y:2013:i:1:p:136-149

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DOI: 10.1007/s12197-011-9173-z

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