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

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Author Info

  • Rangan Gupta

    ()
    (Department of Economics, University of Pretoria)

  • Marius Jurgilas

    ()
    (Financial Stability Directorate, Bank of England)

  • Alain Kabundi

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

  • Stephen M. Miller

    ()
    (College of Business, University of Las Vegas, Nevada)

Abstract

Our paper considers the 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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Bibliographic Info

Paper provided by University of Pretoria, Department of Economics in its series Working Papers with number 200913.

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Length: 25 pages
Date of creation: Jun 2009
Date of revision:
Handle: RePEc:pre:wpaper:200913

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

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References

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Citations

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Cited by:
  1. Helmut Lütkepohl, 2014. "Structural Vector Autoregressive Analysis in a Data Rich Environment: A Survey," Discussion Papers of DIW Berlin 1351, DIW Berlin, German Institute for Economic Research.
  2. Hideaki Hirata & M. Ayhan Kose & Christopher Otrok & Marco E. Terrones, 2012. "Global House Price Fluctuations: Synchronization and Determinants," NBER Working Papers 18362, National Bureau of Economic Research, Inc.
  3. Hideaki Hirata & M. Ayhan Kose & Christopher Otrok & Marco Terrones, 2013. "Global House Price Fluctuations," IMF Working Papers, International Monetary Fund 13/38, International Monetary Fund.
  4. 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, University of Pretoria, Department of Economics 201228, University of Pretoria, Department of Economics.
  5. Ambrogio Cesa-Bianchi, 2012. "Housing Cycles and Macroeconomic Fluctuations: A Global Perspective," Research Department Publications, Inter-American Development Bank, Research Department 4810, Inter-American Development Bank, Research Department.
  6. 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 Model," Working Papers, University of Pretoria, Department of Economics 201222, University of Pretoria, Department of Economics.
  7. 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, University of Pretoria, Department of Economics 201216, University of Pretoria, Department of Economics.

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