Should the Fed take extra action for the recent housing bubble? Evidence from asymmetric transitory shocks

MeiChi Huang () and LinYing Yeh ()

Journal of Economics and Finance, 2015, vol. 39, issue 4, 762-781

Abstract: The paper provides fresh implications for monetary-policy timings and effectiveness by analyzing the roles of asymmetric transitory shocks in housing, real estate investment trust (REIT), and stock price returns under the asymmetric unobserved components framework. The findings show that asymmetric transitory shocks, which characterize Markov-switching low-growth regimes of asset markets, are evidently significant for all asset price returns given the exogenous nature. Noticeably, the year 2005 is the good timing of monetary policies since asymmetric transitory shocks acted as the underlying drivers of housing price dynamics in housing markets of New York, Los Angeles, Boston, Chicago and Washington. The results suggest that two out of three conditions of extra action are satisfied before the housing crisis. However, monetary policies may fail to forestall the recent housing bubbles in New York and Los Angeles as the crisis had already occurred because adverse transitory shocks no longer persist in the two metropolitan housing markets in 2007, the year of the nationwide housing crisis. Copyright Springer Science+Business Media New York 2015

Keywords: Asymmetric transitory shock; Markov-switching low-growth regime; Monetary policies; Housing crisis; C22; E32; G01 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1007/s12197-014-9281-7 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:jecfin:v:39:y:2015:i:4:p:762-781

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/12197/PS2

DOI: 10.1007/s12197-014-9281-7

Access Statistics for this article

Journal of Economics and Finance is currently edited by James Payne

More articles in Journal of Economics and Finance from Springer, Academy of Economics and Finance Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().