The dynamic impact of monetary policy on regional housing prices in the US: Evidence based on factor-augmented vector autoregressions

Manfred Fischer, Florian Huber, Michael Pfarrhofer and Petra Staufer-Steinnocher

Papers from arXiv.org

Abstract: In this study interest centers on regional differences in the response of housing prices to monetary policy shocks in the US. We address this issue by analyzing monthly home price data for metropolitan regions using a factor-augmented vector autoregression (FAVAR) model. Bayesian model estimation is based on Gibbs sampling with Normal-Gamma shrinkage priors for the autoregressive coefficients and factor loadings, while monetary policy shocks are identified using high-frequency surprises around policy announcements as external instruments. The empirical results indicate that monetary policy actions typically have sizeable and significant positive effects on regional housing prices, revealing differences in magnitude and duration. The largest effects are observed in regions located in states on both the East and West Coasts, notably California, Arizona and Florida.

Date: 2018-02
New Economics Papers: this item is included in nep-cba, nep-mon and nep-ure
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Citations: View citations in EconPapers (2)

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Working Paper: The dynamic impact of monetary policy on regional housing prices in the US: Evidence based on factor-augmented vector autoregressions (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1802.05870

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