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Monetary Policy and Regional House-Price Appreciation

Author

Listed:
  • Daniel Cooper

    (Federal Reserve Bank of Boston)

  • María José Luengo-Prado

    (Federal Reserve Bank of Boston)

  • Giovanni P. Olivei

    (Federal Reserve Bank of Boston)

Abstract

This paper examines the link between monetary policy and house-price appreciation by exploiting the fact that monetary policy is set at the national level, but the relative stance of policy can differ across U.S. states. This difference provides an exogenous source of variation to assess the effect of monetary policy on state-level housing prices. Monetary policy has an economically meaningful effect on state-level house-price growth - an effect that is nearly three times as large during the early 2000s housing boom as in non-boom years.

Suggested Citation

  • Daniel Cooper & María José Luengo-Prado & Giovanni P. Olivei, 2022. "Monetary Policy and Regional House-Price Appreciation," International Journal of Central Banking, International Journal of Central Banking, vol. 18(3), pages 173-227, September.
    • Handle: RePEc:ijc:ijcjou:y:2022:q:3:a:5
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    References listed on IDEAS

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    1. Christopher L Foote & Lara Loewenstein & Paul S Willen, 2021. "Cross-Sectional Patterns of Mortgage Debt during the Housing Boom: Evidence and Implications," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(1), pages 229-259.
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    4. Glenn Rudebusch & Lars E.O. Svensson, 1999. "Policy Rules for Inflation Targeting," NBER Chapters, in: Monetary Policy Rules, pages 203-262, National Bureau of Economic Research, Inc.
    5. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LLC, vol. 9(1), pages 86-136, March.
    6. Fuhrer, Jeffrey C & Moore, George R, 1995. "Monetary Policy Trade-offs and the Correlation between Nominal Interest Rates and Real Output," American Economic Review, American Economic Association, vol. 85(1), pages 219-239, March.
    7. Glenn D. Rudebusch & Lars E. O. Svensson, 1998. "Policy rules for inflation targeting," Proceedings, Federal Reserve Bank of San Francisco, issue mar.
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    Cited by:

    1. Gianni La Cava & Calvin He, 2021. "The Distributional Effects of Monetary Policy: Evidence from Local Housing Markets in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 54(3), pages 387-397, September.
    2. Tan, Zhengxun & Tang, Qianqian & Meng, Juan, 2022. "The effect of monetary policy on China’s housing prices before and after 2017: A dynamic analysis in DSGE model," Land Use Policy, Elsevier, vol. 113(C).
    3. Calvin He & Gianni La Cava, 2020. "The Distributional Effects of Monetary Policy: Evidence from Local Housing Markets," RBA Research Discussion Papers rdp2020-02, Reserve Bank of Australia.
    4. Segev, Nimrod & Schaffer, Matthew, 2020. "Monetary policy, bank competition and regional credit cycles: Evidence from a quasi-natural experiment," Journal of Corporate Finance, Elsevier, vol. 64(C).

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    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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