NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Housing and Monetary Policy

John B. Taylor

NBER Working Paper No. 13682
Issued in December 2007
NBER Program(s):   EFG   ME

Since the mid-1980s, monetary policy has contributed to a great moderation of the housing cycle by responding more proactively to inflation and thereby reducing the boom bust cycle. However, during the period from 2002 to 2005, the short term interest rate path deviated significantly from what this two decade experience would suggest is appropriate. A counterfactual simulation with a simple model of the housing market shows that this deviation may have been a cause of the boom and bust in housing starts and inflation in the last two years. Moreover, a significant time series correlation between housing price inflation and delinquency rates suggests that the poor credit assessments on subprime mortgages may also have been caused by this deviation.

download in pdf format
   (267 K)

email paper

This paper is available as PDF (267 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w13682

Published: John B. Taylor, 2007. "Housing and monetary policy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 463-476. citation courtesy of

Users who downloaded this paper also downloaded these:
Mishkin w16755 Monetary Policy Strategy: Lessons from the Crisis
Taylor A Historical Analysis of Monetary Policy Rules
Bernanke and Gertler w7559 Monetary Policy and Asset Price Volatility
Reinhart and Rogoff w14656 The Aftermath of Financial Crises
Capozza, Hendershott, Mack, and Mayer w9262 Determinants of Real House Price Dynamics
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us