TY  - JOUR
AU  - Hamilton,James D.
TI  - Daily Monetary Policy Shocks and the Delayed Response of New Home Sales
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14223
PY  - 2008
Y2  - August 2008
UR  - http://www.nber.org/papers/w14223
L1  - http://www.nber.org/papers/w14223.pdf
N1  - Author contact info:
James D. Hamilton
Department of Economics, 0508
University of California, San Diego
9500 Gilman Drive
La Jolla, CA 92093-0508
Tel: 858/534-5986
Fax: 858/534-7040
E-Mail: jhamilton@ucsd.edu
AB  - This paper offers an explication of the hump-shaped response of real economic activity to changes in monetary policy, focusing on the particular channel operating through new home sales.  I suggest that the conventional notion of a monetary policy shock as a surprise change in the fed funds rate is misspecified.  The primary news for market participants is not what the Fed just did, but is instead new information about what the Fed is going to do in the near future.  Revisions in these anticipations show up instantaneously in long-term mortgage rates.  Although mortgage rates respond well before the Fed actually changes its target rate, home sales do not respond until much later.  The paper attributes this delay to cross-sectional heterogeneity in search times.  This framework offers a description of the lags in the effects of monetary policy that is both more detailed, allowing us in principle to measure the consequences at the daily frequency, and more believable than traditional measures.
ER  -