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Monetary policy and housing sector dynamics in a large-scale Bayesian vector autoregressive model

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  • Rangan Gupta
  • Marius Jurgilas
  • Alain Kabundi
  • Stephen M. Miller

Abstract

Our paper considers the 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 autoregressive 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 react more quickly and sharply than starts and permits and exhibit 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 findings in the sense that the response patterns in the South most closely match the response patterns in the nation as a whole. The West's responses differs the most from the other regions, especially for the impulse responses of housing starts and permits.

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File URL: http://hdl.handle.net/10.3846/1648715X.2011.621466
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Journal of Strategic Property Management.

Volume (Year): 16 (2011)
Issue (Month): 1 (August)
Pages: 1-20

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Handle: RePEc:taf:ijspmg:v:16:y:2011:i:1:p:1-20

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Citations

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Cited by:
  1. Ambrogio Cesa-Bianchi, 2012. "Housing Cycles and Macroeconomic Fluctuations: A Global Perspective," Research Department Publications 4810, Inter-American Development Bank, Research Department.
  2. Hideaki Hirata & M. Ayhan Kose & Christopher Otrok & Marco E. Terrones, 2013. "Global House Price Fluctuations: Synchronization and Determinants," CAMA Working Papers 2013-07, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  3. Vittorio Peretti & Rangan Gupta & Roula Inglesi-Lotz, 2012. "Do House Prices Impact Consumption and Interest Rate in South Africa? Evidence from a Time-Varying Vector Autoregressive Model," Working Papers 201216, University of Pretoria, Department of Economics.
  4. Goodness C. Aye & Mehmet Balcilar & Rangan Gupta & Charl Jooste & Stephen M. Miller & Zeynel Abidin Ozdemir, 2012. "Fiscal Policy Shocks and the Dynamics of Asset Prices: The South African Experience," Working papers 2012-27, University of Connecticut, Department of Economics.
  5. Beatrice D. Simo - Kengne & Mehmet Balcilar & Rangan Gupta & Monique Reid & Goodness C. Aye, 2012. "Is the relationship between monetary policy and house prices asymmetric in South Africa? Evidence from a Markov-Switching Vector Autoregressive mode," Working Papers 14/2012, Stellenbosch University, Department of Economics.
  6. Helmut Lütkepohl, 2014. "Structural Vector Autoregressive Analysis in a Data Rich Environment: A Survey," SFB 649 Discussion Papers SFB649DP2014-004, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  7. Hideaki Hirata & M. Ayhan Kose & Christopher Otrok & Marco Terrones, 2013. "Global House Price Fluctuations," IMF Working Papers 13/38, International Monetary Fund.

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