TY  - JOUR
AU  - Taylor,John B.
TI  - Housing and Monetary Policy
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 13682
PY  - 2007
Y2  - December 2007
UR  - http://www.nber.org/papers/w13682
L1  - http://www.nber.org/papers/w13682.pdf
N1  - Author contact info:
John B. Taylor
Herbert Hoover Memorial Building
Stanford University
Stanford, CA 94305-6010
Tel: 650/723-9677
Fax: 650-723-1687
E-Mail: John.Taylor@stanford.edu
AB  - 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.
ER  -