Has the Fed Responded to House and Stock Prices? A Time-Varying Analysis
Knut Are Aastveit,
Francesco Furlanetto and
Francesca Loria
Additional contact information
Francesca Loria: Board of Governors of the Federal Reserve System
The Review of Economics and Statistics, 2023, vol. 105, issue 5, 1314-1324
Abstract:
We investigate whether the Federal Reserve has responded systematically to house and stock prices and whether this response has changed over time using a Bayesian structural VAR model with time-varying parameters and stochastic volatility. To recover the systematic component of monetary policy, we interpret the interest rate equation in the VAR as an extended monetary policy rule responding to inflation, the output gap, house prices, and stock prices. Our results indicate that the systematic component of monetary policy in the United States responded to real stock price growth significantly but episodically, mainly around recessions and periods of financial instability, and took real house price growth into account only in the years preceding the Great Recession. Around half of the estimated response captures the predictor role of asset prices for future inflation and real economic activity, while the remaining component reflects a direct response to stock prices and house prices.
Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (8)
Downloads: (external link)
https://doi.org/10.1162/rest_a_01120
Access to PDF is restricted to subscribers.
Related works:
Working Paper: Has the Fed responded to house and stock prices? A time-varying analysis (2017) 
Working Paper: Has the Fed responded to house and stock prices? A time-varying analysis (2017) 
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:tpr:restat:v:105:y:2023:i:5:p:1314-1324
Ordering information: This journal article can be ordered from
https://mitpressjour ... rnal/?issn=0034-6535
Access Statistics for this article
The Review of Economics and Statistics is currently edited by Pierre Azoulay, Olivier Coibion, Will Dobbie, Raymond Fisman, Benjamin R. Handel, Brian A. Jacob, Kareen Rozen, Xiaoxia Shi, Tavneet Suri and Yi Xu
More articles in The Review of Economics and Statistics from MIT Press
Bibliographic data for series maintained by The MIT Press ().