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The Housing Bubble: How Much Blame Does the Fed Really Deserve?


  • William Miles

    (Wichita State University)


Two recent empirical papers have blamed the Fed for the latest boom and bust in housing. Neither study includes long-term interest rates, which are more affected by global factors than the federal funds rate (FFR). In this paper, I include both the mortgage rate and the FFR as determinants of housing variables. The results indicate the long-term rate has independent and sometimes greater predictive power for housing than the FFR, especially in recent years. Finally, I demonstrate that the mortgage rate does not simply proxy for monetary policy—the impact of the FFR on long-term rates has also fallen over time.

Suggested Citation

  • William Miles, 2014. "The Housing Bubble: How Much Blame Does the Fed Really Deserve?," Journal of Real Estate Research, American Real Estate Society, vol. 36(1), pages 41-58.
  • Handle: RePEc:jre:issued:v:36:n:1:2014:p:41-58

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    Cited by:

    1. Hsiao-Jung Teng & Chin-Oh Chang & Ming-Chi Chen, 2017. "Housing bubble contagion from city centre to suburbs," Urban Studies, Urban Studies Journal Limited, vol. 54(6), pages 1463-1481, May.
    2. Shi, Song & Jou, Jyh-Bang & Tripe, David, 2014. "Can interest rates really control house prices? Effectiveness and implications for macroprudential policy," Journal of Banking & Finance, Elsevier, vol. 47(C), pages 15-28.
    3. Mahua Barari & Srikanta Kundu, 2019. "The Role of the Federal Reserve in the U.S. Housing Crisis: A VAR Analysis with Endogenous Structural Breaks," JRFM, MDPI, vol. 12(3), pages 1-20, July.

    More about this item

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services


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