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Monetary Policy, Term Structure and Asset Return: Comparing REIT, Housing and Stock

  • Chang, Kuang-Liang
  • Chen, Nan-Kuang
  • Leung, Charles Ka Yui

This paper confirms that a regime-switching model out-performs a linear VAR model in terms of understanding the system dynamics of asset returns. Impulse responses of REIT returns to either the federal funds rate or the interest rate spread are much larger initially but less persistent. Furthermore, the term structure acts as an amplifier of the impulse response for REIT return, a stabilizer for the housing counterpart under some regime, and, perhaps surprisingly, almost no role for the stock return. In contrast, GDP growth has very marginal effect in the impulse response for all assets.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 23514.

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Date of creation: Sep 2009
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Handle: RePEc:pra:mprapa:23514
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