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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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File URL: http://www.sciencedirect.com/science/article/pii/S0165188912002138
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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
DOI: 10.1016/j.jedc.2012.10.008
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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  18. Muellbauer, John, 2008. "Housing, Credit and Consumer Expenditure," CEPR Discussion Papers 6782, C.E.P.R. Discussion Papers.
  19. Frederic S. Mishkin, 2007. "Housing and the monetary transmission mechanism," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 359-413.
  20. 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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