Download or read book Financial Market Liberalization Monetary Policy and Housing Price Dynamic written by Rangan Gupta and published by . This book was released on 2015 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper considers how monetary policy, a Federal funds rate shock, affects the dynamics of the US housing sector and whether the financial market liberalization of the early 1980's influenced those dynamics. The analysis uses impulse response functions obtained from a large-scale Bayesian Vector Autoregression (LBVAR) model over the periods 1968:01 to 1982:12 and 1989:01 to 2003:12, including 21 housing-sector variables at the national and four census regions. Overall, the 100 basis point Federal funds rate shock produces larger effects on the real house prices, both at the regional level and the national level, in the post-liberalization period when compared to the pre-liberalization era. While the precision of the estimates do not imply significant differences, the finding does offer a caution. That is, the housing market appears more sensitive to monetary policy shocks in the post-liberalization period. On the one hand, this suggests that monetary policy possesses increased leverage. On the other hand, the housing market cycle traditionally contributes an important component to the aggregate business cycle. Thus, the monetary authorities may need to exercise more care in implementing Federal funds rate adjustments going forward. In addition, contractionary monetary policy exerts a negative effect on house prices at the national level, indicating the absence of the price puzzle in small structural vector autoregressive models. The puzzle's absence in the housing sector possibly emerges as a result of proper identification of monetary policy shocks within a data-rich environment. Finally, we find that the reaction of housing sector proves heterogeneous across regions, with the housing sector in the South driving the national data after liberalization, while before liberalization, the Middle West appears to drive the housing market. The responses in the West differ the most from the other regions.
Download or read book House Prices and the Macroeconomy written by Charles Goodhart and published by Oxford University Press. This book was released on 2007 with total page 247 pages. Available in PDF, EPUB and Kindle. Book excerpt: House price bubbles, and their aftermath, have become a focus of macro-economic policy concern in most developed countries. This book elucidates the two-way relationship between house-price fluctuations and economic fundamentals. Housing has many features which make it distinct from other assets, like equity. Real estate is not only an asset but also a durable consumption good for households, providing shelter and other housing services. As a result, a house is often the largest and most important asset of households and therefore accounts for a major share of household wealth. Similarly a large share of bank assets is tied to housing values. House price fluctuations may, therefore, have a major effect on economic activity and the soundness of the financial system. Following an introductory chapter, the book is structured into three parts. The first demonstrates the importance of house prices as determinants or indicators of inflation and economic activity. The second focuses on the inter-relationships between bank credit extension and housing prices, and how bubbles can lead to financial crises. The third discusses resultant public policy issues, such as whether, and how, to include housing prices in a general inflation index, and how to restrain the housing/bank credit cycle.
Download or read book The Effects of Housing Prices and Monetary Policy in a Currency Union written by Oriol Aspachs-Bracons and published by International Monetary Fund. This book was released on 2011-01-01 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: The recent boom-and-bust cycle in housing prices has refreshed the debate on the drivers of housing cycles as well as the appropriate policy response. We analyze the case of Spain, where housing prices have soared since it joined the EMU. We present evidence based on a VAR model, and we calibrate a New Keynesian model of a currency area with durable goods to explain it. We find that labor market rigidities provide stronger amplification effects to all type of shocks than financial frictions do. Finally, we show that when the central bank reacts to house prices, the non-durable sector suffers an important contraction. As a result, the boom-and-bust cycle would not have been avoided if Spain had remained outside the EMU during the 1996-2007 period.
Download or read book The Effects of Housing Prices and Monetary Policy in a Currency Union written by and published by "la Caixa". This book was released on with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Real Estate Price Inflation Monetary Policy and Expectations in the United States and Japan written by Hossein Samiei and published by International Monetary Fund. This book was released on 1994 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: During the mid- to late 1980s, inflationary pressures were highly concentrated in asset markets in many industrial countries. This paper discusses why this may have occurred and then develops a forward-looking supply and demand model of the real estate market in which equilibrium prices depend on price expectations, monetary conditions, income, returns to alternative assets, and construction costs. In this model, the current equilibrium price is determined by expectations formed in different time periods by consumers and producers. The model and its more generalized dynamic specifications are estimated by maximum-likelihood methods. The empirical results do not reject the view that the relationship between real estate values and monetary policy was altered in 1980s.
Download or read book The Effects of Housing Prices and Monetary Policy in a Currency Union written by Oriol Aspachs and published by . This book was released on 2009 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many developed countries have seen housing prices and residential investment soar in the last decade. This fact has refreshed the debate on the drivers of housing cycles as well as the appropriate policy response. We analyze these issues for the case of Spain, who has seen the interest rates at historical lows since it joined the EMU, and increasing housing demand pressures from immigration and the baby boom generation. First, we present evidence based on a VAR model that suggests that both monetary and demand shocks are behind Spain's housing boom. Second, we calibrate a New Keynesian dynamic general equilibrium model of a small open economy in a currency area with durable goods. We study the effects of a housing demand shock, a monetary policy shock and a risk premium shock in the model. This allows us to better understand the factors amplifying a housing boom, the role played by the ECB and the recessionary effects of a housing bust. Our results are as follows. First, the model confirms that a combination of these shocks is indeed behind Spain's housing boom. Second, labor market rigidities provide strong amplification effects to all type of shocks, while financial frictions play a secondary role. Third, monetary policy autonomy is of first order importance to cushion risk premium shocks, while this is not the case for housing demand shocks.
Download or read book Seeking Shelter on the Pacific Rim written by Gary Dymski and published by Routledge. This book was released on 2018-10-24 with total page 390 pages. Available in PDF, EPUB and Kindle. Book excerpt: This innovative book analyzes the changes that financial globalization is bringing about in the housing and home-finance markets of the United States, Japan, and South Korea, with special attention to the circumstances of women in obtaining housing, credit, and personal security. The book's focus on changes in the residential and housing finance markets serves as a window for an integrated examination of how the liberalization of national financial markets has affected the relationship among all players in each of the three economies - government, markets, and individual citizens. Through this examination Housing Finance Futures develops a new critical response to economic globalization based on a groundbreaking concept, the social efficiency of policy and market shifts.
Download or read book Monetary and Macroprudential Policy Rules in a Model with House Price Booms written by Mr.Pau Rabanal and published by International Monetary Fund. This book was released on 2009-11-01 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: We argue that a stronger emphasis on macrofinancial risk could provide stabilization benefits. Simulations results suggest that strong monetary reactions to accelerator mechanisms that push up credit growth and asset prices could help macroeconomic stability. In addition, using a macroprudential instrument designed specifically to dampen credit market cycles would also be useful. But invariant and rigid policy responses raise the risk of policy errors that could lower, not raise, macroeconomic stability. Hence, discretion would be required.
Download or read book Three Cycles written by Alain N. Kabundi and published by International Monetary Fund. This book was released on 2009-10-01 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the characteristics and comovement of cycles in house prices, credit, real activity and interest rates in advanced economies during the past 25 years, using a dynamic generalized factor model. House price cycles generally lead credit and business cycles over the long term, while in the short to medium term the relationship varies across countries. Interest rates tend to lag other cycles at all time horizons. While global factors are important, the U.S. business cycle, house price cycle and interest rate cycle generally lead the respective cycles in other countries over all time horizons, while the U.S. credit cycle leads mainly over the long term.
Download or read book Global Housing Markets and Monetary Policy Spillovers written by Scott Luo and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: What are the driving forces of housing market volatilities across countries within the context of financial globalization? To address this broad question, we integrate the Campbell-Shiller decomposition with a dynamic factor model and apply this approach to the housing price-rent ratios in 17 OECD countries. Our novel approach allows us not only to assess geographically the relative importance of global and country-specific factors in explaining the housing market volatilities, but also to distinguish economically between those housing market volatilities attributable to different economic driving forces including the expected rent growth, the expected risk free rate, and the housing risk premium, within global and country-specific factors respectively. We find that the housing market volatility for an average country is mainly driven by the global factors, especially during the years leading up to the 2007-2008 financial crisis. Furthermore, among the global factors it is the global housing risk premium component that is primarily responsible for the housing market volatility. Using a Structural Vector-Autoregressive (SVAR) model identified through the instrumental variable method, we find that an unexpected U.S. monetary policy tightening is typically followed by a persistent and statistically significant rise in the global housing risk premium with some lag to a run-up of the U.S. housing risk premium. Moreover, the local factor in U.S. housing risk premium tends to go up sharply around 2 years before a U.S. recession, and leads the global housing risk premium. Our findings are broadly in line with the credit or risk-taking channel of the monetary policy spillovers from the United States to the global financial markets.
Download or read book The Order of Economic Liberalization written by Ronald I. McKinnon and published by . This book was released on 1991 with total page 224 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Global House Price Fluctuations written by Mr.Hideaki Hirata and published by International Monetary Fund. This book was released on 2013-02-06 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the properties of house price fluctuations across 18 advanced economies over the past 40 years. We ask two specific questions: First, how synchronized are housing cycles across these countries? Second, what are the main shocks driving movements in global house prices? To address these questions, we first estimate the global components in house prices and various macroeconomic and financial variables. We then evaluate the roles played by a variety of global shocks, including shocks to interest rates, monetary policy, productivity, credit, and uncertainty, in explaining house price fluctuations using a wide range of FAVAR models. We find that house prices are synchronized across countries, and the degree of synchronization has increased over time. Global interest rate shocks tend to have a significant negative effect on global house prices whereas global monetary policy shocks per se do not appear to have a sizeable impact. Interestingly, uncertainty shocks seem to be important in explaining fluctuations in global house prices.
Download or read book Housing and the Monetary Transmission Mechanism written by Frederic S. Mishkin and published by . This book was released on 2007 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt: The housing market is of central concern to monetary policy makers. To achieve the dual goals of price stability and maximum sustainable employment, monetary policy makers must understand the role that housing plays in the monetary transmission mechanism if they are to set policy instruments appropriately. In this paper, I examine what we know about the role of housing in the monetary transmission mechanism and then explore the implications of this knowledge for the conduct of monetary policy. I begin with a theoretical and empirical review of the main housing-related channels of the transmission mechanism. These channels include the ways interest rates directly influence the user cost of housing capital, expectations of future house-price movements, and housing supply; and indirectly influence the real economy through standard wealth effects from house prices, balance sheet, credit-channel effects on consumer spending, and balance sheet, credit-channel effects on housing demand. I then consider the interaction of financial stability with the monetary transmission mechanism, and discuss the ways in which the housing sector might be a source of financial instability, and whether such instability could affect the ability of a central bank to stabilize the overall macroeconomy. I conclude with a discussion of two key policy issues. First, how can monetary policy makers deal with the uncertainty with regard to housing-related monetary transmission mechanisms? And second, how can monetary policy best respond to fluctuations in asset prices, especially house prices, and to possible asset-price bubbles?
Download or read book Monetary Policy Housing Investment and Heterogenous Regional Markets written by Michael Fratantoni and published by . This book was released on 2000 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Effect of Monetary Policy on Housing Market A Dynamic Stochastic General Equilibrium Framework written by Kai Ren Tzeng and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Dynamic Impact of Monetary Policy on Regional Housing Prices in the United States written by Manfred M. Fischer and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Handbook of the Political Economy of Financial Crises written by Martin H. Wolfson and published by Oxford University Press. This book was released on 2013-01-07 with total page 785 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Great Financial Crisis that began in 2007-2008 reminds us with devastating force that financial instability and crises are endemic to capitalist economies that lack powerful and dynamically changing financial regulations that can keep the powerful forces of leverage and credit within sustainable bounds. Economists from Marx to Keynes, and Minsky to Kindleberger have well understood this profoundly important fact, yet the dominant mainstream economics of "rational expectations", "efficient markets" and "laissez-faire" that rationalized widespread financial liberalization and still dominates the economics profession has gotten it, literally, "dead wrong". The Handbook of The Political Economy of Financial Crises describes the theoretical, institutional, and historical factors that can help us understand the forces that create financial crises - with an emphasis on the crisis of 2007- 2008 - and the strengths and weaknesses of varying theoretical perspectives and policy approaches that have tried to comprehend and limit these financial tsunamis.
