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House Prices and Monetary Policy in Colombia

Author

Listed:
  • Martha L�pez Pi�eros

Abstract

This paper investigates the possible responses of an inflation-targeting monetary policy in the face of asset price deviations from fundamental values. Focusing on the housing sector of the Colombian economy, we consider a general equilibrium model with frictions in credit market and bubbles in housing prices. We show that monetary policy is less efficient when it responds directly to asset price of housing than a policy that reacts only to deviations of expected inflation (CPI) from target. Some prudential regulation may provide a better outcome in terms of output and inflation variability.

Suggested Citation

  • Martha L�pez Pi�eros, 2006. "House Prices and Monetary Policy in Colombia," Borradores de Economia 2794, Banco de la Republica.
    • Handle: RePEc:col:000094:002794
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    Cited by:

    1. Enrique López & Andr�s Salamanca, 2009. "El efecto riqueza de la vivienda en Colombia," Coyuntura Económica, Fedesarrollo.
    2. Martha López & Eduardo Sarmiento Gómez, 2024. "Collateral, output growth, mortgage spread volatility and subsidies in Colombia," Borradores de Economia 1287, Banco de la Republica de Colombia.
    3. Esteban Gómez & Sandra Rozo, 2008. "Beyond Bubbles: The Role of Asset Prices in Early-Warning Indicators," Revista ESPE - Ensayos Sobre Política Económica, Banco de la República, vol. 26(56), pages 114-148.
    4. Aquiles Arrieta Barcasnegras, 2012. "La relación entre los flujos de capital y el precio de la vivienda: el caso colombiano," Revista de Economía del Caribe, Universidad del Norte, vol. 0(0), pages 1-33.
    5. Weida Kuang & Peng Liu, 2015. "Inflation and House Prices: Theory and Evidence from 35 Major Cities in China," International Real Estate Review, Global Social Science Institute, vol. 18(2), pages 217-240.

    More about this item

    Keywords

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    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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