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Do central banks respond to house price movements? A Bayesian DSGE approach

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  • Longcan Li

Abstract

This thesis explores whether monetary policy reacts to house price movements, by employing a New Keynesian model with a housing factor and estimated using Bayesian estimation techniques. The primary emphasis of this study is on the United States, with supplementary analyses on central banks in several advanced economies. The principal finding of this thesis reveals that the Federal Reserve responded substantially but episodically to house prices. Furthermore, my investigation indicates that the Reserve Bank of Australia, the Reserve Bank of New Zealand, Bank of England, and the European Central Bank did not incorporate house prices into their policy framework, whereas the Bank of Canada did so episodically. The baseline results remain robust across a range of sensitivity checks.

Suggested Citation

  • Longcan Li, 2024. "Do central banks respond to house price movements? A Bayesian DSGE approach," Australian Economic Papers, Wiley Blackwell, vol. 63(S1), pages 99-114, May.
    • Handle: RePEc:bla:ausecp:v:63:y:2024:i:s1:p:99-114
    DOI: 10.1111/1467-8454.12350
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    References listed on IDEAS

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