Low Interest Rates and Housing Bubbles: Still No Smoking Gun
This paper revisits the relationship between interest rates and house prices. Surveying a number of recent studies and bringing to bear some new evidence on the question, this paper argues that in the data, the impact of interest rates on house prices appears to be quite modest. Specifically, the estimated effects are uniformly smaller than those implied by the conventional user cost theory of house prices, and they are too small to explain the previous decadeÂ’s real estate boom in the U.S. and elsewhere. However in some countries, there does appear to have been a link between the rapid expansion of the monetary base and growth in house prices and housing credit.
|Date of creation:||Jan 2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 413 597 2476
Fax: 413 597 4045
Web page: http://econ.williams.edu
More information through EDIRC
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Campbell, John, 1991.
"A Variance Decomposition for Stock Returns,"
3207695, Harvard University Department of Economics.
- Edward L. Glaeser & Joshua D. Gottlieb & Joseph Gyourko, 2012.
"Can Cheap Credit Explain the Housing Boom?,"
in: Housing and the Financial Crisis, pages 301-359
National Bureau of Economic Research, Inc.
- Filipa Sá & Pascal Towbin & Tomasz Wieladek, 2011.
"Low interest rates and housing booms: the role of capital inflows, monetary policy and financial innovation,"
Globalization and Monetary Policy Institute Working Paper
79, Federal Reserve Bank of Dallas.
- Sa, Filipa & Towbin, Pascal & wieladek, tomasz, 2011. "Low interest rates and housing booms: the role of capital inflows, monetary policy and financial innovation," Bank of England working papers 411, Bank of England.
- Del Negro, Marco & Otrok, Christopher, 2007. "99 Luftballons: Monetary policy and the house price boom across U.S. states," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 1962-1985, October.
- Giovanni Dell'Ariccia & Robert Marquez & Luc Laeven, 2010.
"Monetary Policy, Leverage, and Bank Risk-Taking,"
IMF Working Papers
10/276, International Monetary Fund.
- Leonardo Gambacorta, 2009. "Monetary policy and the risk-taking channel," BIS Quarterly Review, Bank for International Settlements, December.
- Charles Himmelberg & Christopher Mayer & Todd Sinai, 2005.
"Assessing High House Prices: Bubbles, Fundamentals, and Misperceptions,"
NBER Working Papers
11643, National Bureau of Economic Research, Inc.
- Charles Himmelberg & Christopher Mayer & Todd Sinai, 2005. "Assessing High House Prices: Bubbles, Fundamentals and Misperceptions," Journal of Economic Perspectives, American Economic Association, vol. 19(4), pages 67-92, Fall.
- Charles Himmelberg & Christopher Mayer & Todd Sinai, 2005. "Assessing high house prices: bubbles, fundamentals, and misperceptions," Staff Reports 218, Federal Reserve Bank of New York.
- Marek Jarocinski & Frank R. Smets, 2008.
"House prices and the stance of monetary policy,"
Federal Reserve Bank of St. Louis, issue Jul, pages 339-366.
- Kuttner, Kenneth N., 2001.
"Monetary policy surprises and interest rates: Evidence from the Fed funds futures market,"
Journal of Monetary Economics,
Elsevier, vol. 47(3), pages 523-544, June.
- Kenneth N. Kuttner, 2000. "Monetary policy surprises and interest rates: evidence from the Fed funds futures markets," Staff Reports 99, Federal Reserve Bank of New York.
- Carmen M. Reinhart & Vincent Reinhart, 2011.
"Pride Goes Before a Fall: Federal Reserve Policy and Asset Markets,"
NBER Working Papers
16815, National Bureau of Economic Research, Inc.
- repec:dgr:kubcen:200931s is not listed on IDEAS
- Charles Goodhart & Boris Hofmann, 2008.
"House prices, money, credit, and the�macroeconomy,"
Oxford Review of Economic Policy,
Oxford University Press, vol. 24(1), pages 180-205, spring.
- Jane Dokko & Brian Doyle & Michael T. Kiley & Jinill Kim & Shane Sherlund & Jae Sim & Skander Van den Heuvel, 2009. "Monetary policy and the housing bubble," Finance and Economics Discussion Series 2009-49, Board of Governors of the Federal Reserve System (U.S.).
- Joshua Gallin, 2008. "The Long-Run Relationship Between House Prices and Rents," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 36(4), pages 635-658, December.
- Campbell, Sean D. & Davis, Morris A. & Gallin, Joshua & Martin, Robert F., 2009. "What moves housing markets: A variance decomposition of the rent-price ratio," Journal of Urban Economics, Elsevier, vol. 66(2), pages 90-102, September.
- Ioannidou, V. & Ongena, S. & Peydro, J.L., 2009. "Monetary Policy, Risk-Taking, and Pricing : Evidence from a Quasi-Natural Experiment," Discussion Paper 2009-31 S, Tilburg University, Center for Economic Research.
When requesting a correction, please mention this item's handle: RePEc:wil:wileco:2012-01. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Stephen Sheppard)
If references are entirely missing, you can add them using this form.