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An SVAR Analysis of Monetary Policy Dynamics and Housing Market Responses in Australia

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Author Info

  • IKM Mokhtarul Wadud

    ()

  • Omar HMN Bashar

    ()

  • Huson Joher Ali Ahmed

    ()

Abstract

This paper examines the impact of monetary policy and a range of sector-specific and macroeconomic shocks on the Australian housing market using quarterly data for a period of 1974-2008. The paper develops a structural vector autoregressive (SVAR) model based on contemporaneous restrictions to analyse the dynamics of these shocks. The results indicate that supply of new houses in Australia rises with higher real house prices; and that house prices rise and fall with higher inflation rate and interest rate, respectively. Dynamics of the impulse responses reveal significant effect of monetary policy on new house constructions, real house prices, material costs and inflation. Results also suggest that housing output, real house prices and interest rates respond significantly to shocks to housing supply, housing demand and to a number of other variables. These results are expected to shed some lights on the current policy environment pertaining to the Australian housing sector.

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File URL: http://www.deakin.edu.au/buslaw/aef/workingpapers/papers/2009_22.pdf
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Bibliographic Info

Paper provided by Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance in its series Economics Series with number 2009_22.

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Date of creation: 22 Dec 2009
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Handle: RePEc:dkn:econwp:eco_2009_22

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Keywords: Monetary transmission; Housing market; Structural VAR;

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