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Learning about monetary policy rules when the housing market matters

  • Xiao, Wei
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In this paper we study a general equilibrium model with a housing market, and use stability under adaptive learning as a criterion to evaluate monetary policy rules. An important feature of the model is that there exist credit-constrained borrowers who use their housing assets as collateral to finance purchases. We evaluate both conventional Taylor rules and rules that incorporate other targets such as housing prices. We find that the effect of responding to housing prices, in addition to output and inflation, depends critically on the assumed information structure of the economy.

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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 37 (2013)
Issue (Month): 3 ()
Pages: 500-515

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Handle: RePEc:eee:dyncon:v:37:y:2013:i:3:p:500-515
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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  7. Matteo Iacoviello, 2002. "House prices, borrowing constraints and monetary policy in the business cycle," Boston College Working Papers in Economics 542, Boston College Department of Economics, revised 06 Dec 2004.
  8. Kiyotaki, Nobuhiro & Moore, John, 1997. "Credit Cycles," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 211-48, April.
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  18. Charles T. Carlstrom & Timothy S. Fuerst, 2003. "Investment and interest rate policy: a discrete time analysis," Working Paper 0320, Federal Reserve Bank of Cleveland.
  19. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," NBER Working Papers 6455, National Bureau of Economic Research, Inc.
  20. George Evans & William Branch, 2003. "Intrinsic Heterogeneity in Expectation Formation," Computing in Economics and Finance 2003 312, Society for Computational Economics.
  21. Williamson, Stephen D, 1987. "Financial Intermediation, Business Failures, and Real Business Cycles," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1196-1216, December.
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