Learning, Monetary Policy and Housing Prices
AbstractThis paper evaluates different types of simple monetary policy rules according to the determinacy and learnability of rational expectations equilibrium criteria within a dynamic stochastic general equilibrium framework. Incorporating housing prices and collateralized borrowing into the standard model allow us to answer important policy questions. One objective is to investigate whether responding to housing prices affects determinacy and learnability of rational expectations equilibrium. For this purpose, we work with a New Keynesian model in which housing plays an accelerator role in business cycles as a collateralized asset. The results show that for current data rule, responding to asset prices does not improve learnable outcomes but for a monetary policy with lagged data and forward-looking rules we see improved learnable outcome if current housing prices are available to monetary authority. Moreover, we examine the effects of interest rate inertia and price stickiness on E-stability of REE.
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Bibliographic InfoPaper provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its series Working Papers with number 1203.
Date of creation: 2012
Date of revision:
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More information through EDIRC
monetary policy rules; determinacy; learning; housing prices;
Find related papers by JEL classification:
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-18 (All new papers)
- NEP-CBA-2012-01-18 (Central Banking)
- NEP-MAC-2012-01-18 (Macroeconomics)
- NEP-MON-2012-01-18 (Monetary Economics)
- NEP-URE-2012-01-18 (Urban & Real Estate Economics)
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