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Monetary Policy and Housing Sector Dynamics in a Large-Scale Bayesian Vector Autoregressive Mode

  • Rangan Gupta

    ()

    (Department of Economics, University of Pretoria)

  • Marius Jurgilas

    ()

    (Financial Stability Directorate, Bank of England)

  • Alan Kabundi

    ()

    (Department of Economics and Econometrics, University of Johannesburg)

  • Stephen M. Miller

    ()

    (Department of Economics, University of Nevada, Las Vegas)

Our paper considers this channel whereby monetary policy, a Federal funds rate shock, affects the dynamics of the US housing sector. The analysis uses impulse response functions obtained from a large-scale Bayesian Vector Autoregression (LBVAR) model that incorporates 143 monthly macroeconomic variables over the period of 1986:01 to 2003:12, including 21 variables relating to the housing sector at the national and four census regions. We find at the national level that housing starts, housing permits, and housing sales fall in response to the tightening of monetary policy. Housing sales reacts more quickly and sharply than starts and permits and exhibits more duration. Housing prices show the weakest response to the monetary policy shock. At the regional level, we conclude that the housing sector in the South drives the national data. The responses in the West differ the most from the other regions, especially for the impulse responses of housing starts and permits.

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File URL: http://web.unlv.edu/projects/RePEc/pdf/0919.pdf
File Function: First version, 2008
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Paper provided by University of Nevada, Las Vegas , Department of Economics in its series Working Papers with number 0919.

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Length: 25 pages
Date of creation: Jun 2009
Date of revision:
Handle: RePEc:nlv:wpaper:0919
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Web page: http://business.unlv.edu/econ/
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  1. David B. Gordon & Eric M. Leeper, 1992. "The dynamic impacts of monetary policy: an exercise in tentative identification," Working Paper 92-13, Federal Reserve Bank of Atlanta.
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  3. Rangan Gupta & Marius Jurgilas & Alain Kabundi, 2009. "The Effect Of Monetary Policy On Real House Price Growth In South Africa: A Factor Augmented Vector Autoregression (Favar) Approach," Working Papers 200905, University of Pretoria, Department of Economics.
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