Monetary Policy, the Housing Market, and the 2008 Recession: A Structural Factor Analysis
AbstractDThis paper estimates a Structural Dynamic Factor Model on a panel of 102 US quarterly series. We model economic comovements by means of 5 underlying structural shocks (oil price, productivity, aggregate demand, monetary policy, and housing demand). The results of the benchmark model (impulse responses and variance decompositions) are in line with those predicted by economic theory and usually estimated by the empirical literature. We show that while over the whole sample the contribution of the housing demand shock is negligible, after the early eighties' liberalizations in housing finance, the housing demand shock has become a substantial source of business cycle fluctuations. The model is then used to analyze the causes of the 2008 recession: results indicate that we cannot exclude that monetary policy played a non negligible role in leading the way for the downturn in residential investment and the ensuing recession.\\ JEL Classification: C32, E32, E52, R2
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Bibliographic InfoPaper provided by Doctoral School of Economics, Sapienza University of Rome in its series Working Papers with number 7.
Date of creation: 2010
Date of revision: 2010
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Web page: http://phdschool-economics.dse.uniroma1.it/website/
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Structural Factor Model; Business Cycle; Monetary Policy; Housing.;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-04-17 (All new papers)
- NEP-MAC-2010-04-17 (Macroeconomics)
- NEP-MON-2010-04-17 (Monetary Economics)
- NEP-URE-2010-04-17 (Urban & Real Estate Economics)
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