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Monetary Policy and Housing Sector Dynamics in a Large-Scale Bayesian Vector Autoregressive Model

Rangan Gupta (), Marius Jurgilas (), Alain Kabundi () and Stephen Miller ()

No 2009-19, Working papers from University of Connecticut, Department of Economics

Abstract: Our paper considers this channel whereby monetary policy, a Federal funds rate shock, affects the dynamics of the US housing sector. The analysis uses impulse response functions obtained from a large-scale Bayesian Vector Autoregression (LBVAR) model that incorporates 143 monthly macroeconomic variables over the period of 1986:01 to 2003:12, including 21 variables relating to the housing sector at the national and four census regions. We find at the national level that housing starts, housing permits, and housing sales fall in response to the tightening of monetary policy. Housing sales reacts more quickly and sharply than starts and permits and exhibits more duration. Housing prices show the weakest response to the monetary policy shock. At the regional level, we conclude that the housing sector in the South drives the national data. The responses in the West differ the most from the other regions, especially for the impulse responses of housing starts and permits.

Keywords: Monetary policy; Housing sector dynamics; Large-Scale BVAR models (search for similar items in EconPapers)
JEL-codes: C32 R31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-ure
Date: 2009-06
Note: We would like to thank Marta Banbura for providing us with the codes used in estimating the large-scale BVAR and her assistance with its implementation. The views expressed herein are those of the authors and do not necessarily reflect the views of the Bank of England.
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Published in International Journal of Strategic Property Management, April 2012

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Related works:
Journal Article: Monetary policy and housing sector dynamics in a large-scale Bayesian vector autoregressive model (2011) Downloads
Working Paper: Monetary Policy and Housing Sector Dynamics in a Large-Scale Bayesian Vector Autoregressive Mode (2009) Downloads
Working Paper: Monetary Policy and Housing Sector Dynamics in a Large-Scale Bayesian Vector Autoregressive Model (2009)
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