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Monetary Policy and Housing Sector Dynamics in a Large-Scale Bayesian Vector Autoregressive Mode

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Author Info

  • Rangan Gupta

    ()
    (Department of Economics, University of Pretoria)

  • Marius Jurgilas

    ()
    (Financial Stability Directorate, Bank of England)

  • Alan Kabundi

    ()
    (Department of Economics and Econometrics, University of Johannesburg)

  • Stephen M. Miller

    ()
    (Department of Economics, University of Nevada, Las Vegas)

Abstract

Our paper considers this 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 Autoregression (LBVAR) 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 reacts more quickly and sharply than starts and permits and exhibits 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 data. The responses in the West differ the most from the other regions, especially for the impulse responses of housing starts and permits.

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File URL: http://web.unlv.edu/projects/RePEc/pdf/0919.pdf
File Function: First version, 2008
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Bibliographic Info

Paper provided by University of Nevada, Las Vegas , Department of Economics in its series Working Papers with number 0919.

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Length: 25 pages
Date of creation: Jun 2009
Date of revision:
Handle: RePEc:nlv:wpaper:0919

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Keywords: Monetary policy; Housing sector dynamics; Large-Scale BVAR mode;

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Citations

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Cited by:
  1. 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.
  2. 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.
  3. 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.
  4. Cesa-Bianchi, Ambrogio, 2013. "Housing cycles and macroeconomic fluctuations: A global perspective," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 215-238.
  5. Hideaki Hirata & M. Ayhan Kose & Christopher Otrok & Marco E Terrones, 2013. "Global House Price Fluctuations: Synchronization and Determinants," NBER International Seminar on Macroeconomics, University of Chicago Press, vol. 9(1), pages 119 - 166.
  6. Hideaki Hirata & M. Ayhan Kose & Christopher Otrok & Marco Terrones, 2013. "Global House Price Fluctuations," IMF Working Papers 13/38, International Monetary Fund.
  7. Goodness C. Aye & Mehmet Balcilar & Rangan Gupta & Charl Jooste & Stephen M. Miller & Zeynel A. Ozdemir, 2012. "Fiscal Policy Shocks and the Dynamics of Asset Prices: The South African Experience," Working Papers 201228, University of Pretoria, Department of Economics.

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