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Monetary policy and US housing expansions: The case of time-varying supply elasticities

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  • Albuquerque, Bruno
  • Iseringhausen, Martin
  • Opitz, Frederic

Abstract

We challenge the assumption in the literature of constant housing supply elasticities across housing expansions. Using a time-varying parameter (TVP)-VAR model on monthly US data since the early 1990s, we find that the response of housing supply to an expansionary monetary policy shock relative to the response of house prices has declined substantially since the Great Financial Crisis (GFC). Our findings are consistent with research suggesting that land-use regulation has tightened. Absent major reversions in regulation, our results point to a post-COVID-19 housing recovery characterised by a sluggish response of housebuilding to demand, but a relatively stronger response of house prices.

Suggested Citation

  • Albuquerque, Bruno & Iseringhausen, Martin & Opitz, Frederic, 2020. "Monetary policy and US housing expansions: The case of time-varying supply elasticities," Economics Letters, Elsevier, vol. 195(C).
    • Handle: RePEc:eee:ecolet:v:195:y:2020:i:c:s0165176520302895
    DOI: 10.1016/j.econlet.2020.109471
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    References listed on IDEAS

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    5. Knut Are Aastveit & Bruno Albuquerque & André K. Anundsen, 2023. "Changing Supply Elasticities and Regional Housing Booms," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(7), pages 1749-1783, October.
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    3. Yun Liu, 2022. "Housing and monetary policy: Fresh evidence from China," Financial Economics Letters, Anser Press, vol. 1(1), pages 1-12, December.
    4. Rella, Giacomo, 2025. "Time-varying interactions between monetary and housing credit policy," Journal of Macroeconomics, Elsevier, vol. 86(C).

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