Infrequent Housing Adjustment, Limited Participation, and Monetary Policy

Andra Ghent

Journal of Money, Credit and Banking, 2012, vol. 44, issue 5, 931-955

Abstract: This paper asks why monetary contractions have strong effects on the housing market. The paper presents a model with staggered housing adjustment in which monetary policy has real effects in the absence of any rigidity in producer pricing or wages. Limited participation in financial markets leads to a rise in the real mortgage rate following an increase in the nominal short rate. Since households must take on a mortgage to consume housing, the rise in the real interest rate reduces the share of residential investment in output.

Date: 2012
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https://doi.org/10.1111/j.1538-4616.2012.00516.x

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Journal Article: Infrequent Housing Adjustment, Limited Participation, and Monetary Policy (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:44:y:2012:i:5:p:931-955

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