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Did the FED Inflate a Housing Price Bubble? A Cointegration Analysis between the 1980s and the 1990s

Author

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  • Clemente De Lucia

    (BNP Paribas, Paris, France)

Abstract

The aim of this work is to verify if the recent episodes of expansionary policies followed by the FED contributed to the creation a housing price bubble. This study compares two different samples, both including periods of recession followed by accommodating monetary policies. The paper showed that even though the long-run relationship between inflation and the interest rate did not change along the whole sample, suggesting an unaltered behavior of the central bank with respect to changes in inflation, the reactivity of housing prices to monetary policy has considerably augmented during the 1990s compared to the 1980s. This is interpreted as evidence that prolonged accommodating monetary policies affected the US real estate market.

Suggested Citation

  • Clemente De Lucia, 2007. "Did the FED Inflate a Housing Price Bubble? A Cointegration Analysis between the 1980s and the 1990s," ISAE Working Papers 82, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
    • Handle: RePEc:isa:wpaper:82
    as

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    References listed on IDEAS

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    Cited by:

    1. Ali Akbar Gholizadeh, 2014. "Capital Gains Tax and Housing Price Bubble: A Cross-Country Study," Iranian Economic Review (IER), Faculty of Economics,University of Tehran.Tehran,Iran, vol. 18(2), pages 47-71, Spring.

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    More about this item

    Keywords

    Housing Price Bubble; Monetary Policy; Cointegration;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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