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House prices, consumption, and monetary policy: a financial accelerator approach

Kosuke Aoki, James Proudman and Gertjan Vlieghe ()

No 7, Royal Economic Society Annual Conference 2003 from Royal Economic Society

Abstract: We consider a general equilibrium model where asymmetric information problems create frictions in credit markets used by households. In our economy, houses serve as collateral to lower the agency costs related to borrowing. We show that this amplifies the effect of monetary policy shocks on housing investment, house prices and consumption. We consider the effect of a structural change in credit markets that lowers the transaction costs of additional borrowing against housing equity. We show that such a change would increase the effect of monetary policy shocks on consumption, but would decrease the effect on house prices and housing investment.

Keywords: house prices; credit frictions; monetary policy; financial accelerator; consumption (search for similar items in EconPapers)
JEL-codes: E32 E50 R21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo, nep-mon and nep-ure
Date: 2003-06-04
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Journal Article: House prices, consumption, and monetary policy: a financial accelerator approach (2004) Downloads
Working Paper: House prices, consumption, and monetary policy: a financial accelerator approach (2002) Downloads
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