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Do Central Banks React to House Prices?

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Author Info
Finocchiaro, Daria () (Research Department, Central Bank of Sweden)
Queijo von Heideken, Virginia () (Research Department, Central Bank of Sweden)

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Abstract

The substantial fluctuations in house prices recently experienced by many industrialized economies have stimulated a vivid debate on the possible implications for monetary policy. In this paper, we ask whether the U.S. Fed, the Bank of Japan and the Bank of England have reacted to house prices. We study the responses of these central banks by estimating a structural model for each country where credit constrained agents borrow against real estate. The main result is that house price movements did play a separate role in the U.K. and Japanese central bank reaction functions, while they did not in the U.S.

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Publisher Info
Paper provided by Sveriges Riksbank (Central Bank of Sweden) in its series Working Paper Series with number 217.

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Length: 51 pages
Date of creation: 01 Nov 2007
Date of revision:
Handle: RePEc:hhs:rbnkwp:0217

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Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden
Phone: 08 - 787 00 00
Fax: 08-21 05 31
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Web page: http://www.riksbank.com/
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Related research
Keywords: House prices monetary policy DSGE models Bayesian estimation

Find related papers by JEL classification:
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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References listed on IDEAS
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  1. Riccardo DiCecio & Edward Nelson, 2007. "An estimated DSGE model for the United Kingdom," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 215-232. [Downloadable!]
    Other versions:
  2. Antonello D'Agostino & Luca Sala & Paolo Surico, 2005. "The Fed and the Stock Market," Macroeconomics 0507001, EconWPA. [Downloadable!]
    Other versions:
  3. Christopher D. Carroll & Misuzu Otsuka & Jirka Slacalek, 2006. "How Large Is the Housing Wealth Effect? A New Approach," NBER Working Papers 12746, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Adolfson, Malin & Laseen, Stefan & Linde, Jesper & Villani, Mattias, 2007. "Bayesian estimation of an open economy DSGE model with incomplete pass-through," Journal of International Economics, Elsevier, vol. 72(2), pages 481-511, July. [Downloadable!] (restricted)
    Other versions:
  5. Chadha, Jagjit S & Sarno, Lucio & Valente, Giorgio, 2003. "Monetary Policy Rules, Asset Prices and Exchange Rates," CEPR Discussion Papers 4114, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  6. Ben Bernanke & Mark Gertler, 1999. "Monetary policy and asset price volatility," Proceedings, Federal Reserve Bank of Kansas City, pages 77-128. [Downloadable!]
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  7. Carsten Detken & Frank Smets, 2004. "Asset price booms and monetary policy," Working Paper Series 364, European Central Bank. [Downloadable!]
  8. Lawrence J. Christiano, Martin Eichenbaum, and Charles L. Evans, 2005. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 1-45, February.
    Other versions:
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