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Learning, monetary policy and housing prices

Birol Kanık

MPRA Paper from University Library of Munich, Germany

Abstract: This paper evaluates different types of simple monetary policy rules according to the determinacy and learnability of rational expectations equilibrium criteria within a dynamic stochastic general equilibrium framework. Incorporating housing prices and collateralized borrowing into the standard model allow us to answer important policy questions. One objective is to investigate whether responding to housing prices affects determinacy and learnability of rational expectations equilibrium. For this purpose, we work with a New Keynesian model in which housing plays an accelerator role in business cycles as a collateralized asset. The results show that for current data rule, responding to asset prices does not improve learnable outcomes but for a monetary policy with lagged data and forward-looking rules we see improved learnable outcome if current housing prices are available to monetary authority. Moreover, we examine the effects of interest rate inertia and price stickiness on E-stability of REE.

Keywords: monetary policy rules; determinacy; learning; housing prices (search for similar items in EconPapers)
JEL-codes: E3 E4 E5 (search for similar items in EconPapers)
Date: 2011-03-25
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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