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Monetary Policy and the Housing Market: A Structural Factor Analysis

  • Matteo Luciani

This paper studies the role of the Federal Reserve’s policy in the recent boom and bustof the housing market, and in the ensuing recession. By estimating a Structural DynamicFactor model on a panel of 109 US quarterly variables from 1982 to 2010, we find that,although the Federal Reserve’s policy between 2002 and 2004 was slightly expansionary,its contribution to the recent housing cycle was negligible. We also show that a morerestrictive policy would have smoothed the cycle but not prevented the recession. Wethus find no role for the Federal Reserve in causing the recession.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers ECARES with number ECARES 2012-035.

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Length: 24 p.
Date of creation: Oct 2012
Date of revision:
Publication status: Published by:
Handle: RePEc:eca:wpaper:2013/129931
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