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The Housing Supply Channel Of Monetary Policy
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Book Synopsis The Housing Supply Channel of Monetary Policy by : Bruno Albuquerque
Download or read book The Housing Supply Channel of Monetary Policy written by Bruno Albuquerque and published by International Monetary Fund. This book was released on 2024-02-02 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the role of regional housing markets in the transmission of US monetary policy. Using a FAVAR model over 1999q1–2019q4, we find sizeable heterogeneity in the responses of US states to a contractionary monetary policy shock. Part of this regional variation is due to differences in housing supply elasticities, household debt overhang, and housing wealth (volatility). Our analysis indicates that house prices and consumption respond more in supply-inelastic states and in states with large household debt imbalances, where negative housing wealth effects bite more strongly and borrowing constraints become more binding. Moreover, financial stability risks increase sharply in these areas as mortgage delinquencies and foreclosures surge, worsening banks’ balance sheets. Finally, monetary policy may have a stronger effect on housing tenure decisions in supply-inelastic states, where the homeownership rate and price-to-rent ratios decline by more. Our findings stress the importance of regional housing supply conditions in assessing the macrofinancial effects of rising interest rates.
Book Synopsis Housing and the Monetary Transmission Mechanism by : Frederic S. Mishkin
Download or read book Housing and the Monetary Transmission Mechanism written by Frederic S. Mishkin and published by . This book was released on 2007 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt: The housing market is of central concern to monetary policy makers. To achieve the dual goals of price stability and maximum sustainable employment, monetary policy makers must understand the role that housing plays in the monetary transmission mechanism if they are to set policy instruments appropriately. In this paper, I examine what we know about the role of housing in the monetary transmission mechanism and then explore the implications of this knowledge for the conduct of monetary policy. I begin with a theoretical and empirical review of the main housing-related channels of the transmission mechanism. These channels include the ways interest rates directly influence the user cost of housing capital, expectations of future house-price movements, and housing supply; and indirectly influence the real economy through standard wealth effects from house prices, balance sheet, credit-channel effects on consumer spending, and balance sheet, credit-channel effects on housing demand. I then consider the interaction of financial stability with the monetary transmission mechanism, and discuss the ways in which the housing sector might be a source of financial instability, and whether such instability could affect the ability of a central bank to stabilize the overall macroeconomy. I conclude with a discussion of two key policy issues. First, how can monetary policy makers deal with the uncertainty with regard to housing-related monetary transmission mechanisms? And second, how can monetary policy best respond to fluctuations in asset prices, especially house prices, and to possible asset-price bubbles?
Book Synopsis How Monetary Policy Shaped the Housing Boom by : Itamar Drechsler
Download or read book How Monetary Policy Shaped the Housing Boom written by Itamar Drechsler and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Between 2003 and 2006, the Federal Reserve raised rates by 4.25%. Yet it was precisely during this period that the housing boom accelerated, fueled by rapid growth in mortgage lending. There is deep disagreement about how, or even if, monetary policy impacted the boom. Using heterogeneity in banks' exposures to the deposits channel of monetary policy, we show that Fed tightening induced a large reduction in banks' deposit funding, leading them to contract new on-balance-sheet lending for home purchases by 26%. However, an unprecedented expansion in privately-securitized loans, led by nonbanks, largely offset this contraction. Since privately-securitized loans are neither GSE-insured nor deposit-funded, they are run-prone, which made the mortgage market fragile. Consistent with our theory, the re-emergence of privately-securitized mortgages has closely tracked the recent increase in rates.
Book Synopsis Guaranteed to Fail by : Viral V. Acharya
Download or read book Guaranteed to Fail written by Viral V. Acharya and published by Princeton University Press. This book was released on 2011-03-14 with total page 233 pages. Available in PDF, EPUB and Kindle. Book excerpt: Why America's public-private mortgage giants threaten the world economy—and what to do about it The financial collapse of Fannie Mae and Freddie Mac in 2008 led to one of the most sweeping government interventions in private financial markets in history. The bailout has already cost American taxpayers close to $150 billion, and substantially more will be needed. The U.S. economy--and by extension, the global financial system--has a lot riding on Fannie and Freddie. They cannot fail, yet that is precisely what these mortgage giants are guaranteed to do. How can we limit the damage to our economy, and avoid making the same mistakes in the future? Guaranteed to Fail explains how poorly designed government guarantees for Fannie Mae and Freddie Mac led to the debacle of mortgage finance in the United States, weighs different reform proposals, and provides sensible, practical recommendations. Despite repeated calls for tougher action, Washington has expanded the scope of its guarantees to Fannie and Freddie, fueling more and more housing and mortgages all across the economy--and putting all of us at risk. This book unravels the dizzyingly immense, highly interconnected businesses of Fannie and Freddie. It proposes a unique model of reform that emphasizes public-private partnership, one that can serve as a blueprint for better organizing and managing government-sponsored enterprises like Fannie Mae and Freddie Mac. In doing so, Guaranteed to Fail strikes a cautionary note about excessive government intervention in markets.
Book Synopsis Monetary Policy and the Housing Bubble by :
Download or read book Monetary Policy and the Housing Bubble written by and published by DIANE Publishing. This book was released on with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Monetary Policy and the Housing Market During the Last Decade by : Jing Zhang
Download or read book Monetary Policy and the Housing Market During the Last Decade written by Jing Zhang and published by . This book was released on 2014 with total page 102 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines how monetary policy influences the housing market in U.S. with a special emphasis on the recent financial crisis dating from 2007, which started from the burst of bubbles in the housing market. Using monthly U.S. data spanning over the period from January 2000 to July 2011, I estimate Vector Auto-regressive(VAR) models using data for each metropolitan statistical area (MSA) to analyze the interaction between local housing markets and monetary policy. Aggregate responses of housing variables to monetary policy are also estimated by adopting composite data. Empirical results show that employment and housing price index both respond negatively to a positive monetary policy shock; while the significance and magnitude of the influence varies across MSAs. Compared to the aggregate effects, monetary policy is more likely to be effective in the west and the east, namely, California and Florida, and is more likely to be ineffective in the middle states, namely, Texas. The regional asymmetry in the efficacy of monetary policy could be resulted by various sources, like industry composition, housing supply elasticities, and credit condition.
Book Synopsis The Effects of Housing Prices and Monetary Policy in a Currency Union by : Oriol Aspachs-Bracons
Download or read book The Effects of Housing Prices and Monetary Policy in a Currency Union written by Oriol Aspachs-Bracons and published by International Monetary Fund. This book was released on 2011-01-01 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: The recent boom-and-bust cycle in housing prices has refreshed the debate on the drivers of housing cycles as well as the appropriate policy response. We analyze the case of Spain, where housing prices have soared since it joined the EMU. We present evidence based on a VAR model, and we calibrate a New Keynesian model of a currency area with durable goods to explain it. We find that labor market rigidities provide stronger amplification effects to all type of shocks than financial frictions do. Finally, we show that when the central bank reacts to house prices, the non-durable sector suffers an important contraction. As a result, the boom-and-bust cycle would not have been avoided if Spain had remained outside the EMU during the 1996-2007 period.
Book Synopsis Essays on Housing and Monetary Policy by : Min-Ho Nam
Download or read book Essays on Housing and Monetary Policy written by Min-Ho Nam and published by . This book was released on 2013 with total page 398 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis, motivated by my reflections about the failings of monetary policy implementation as a cause of the sub-prime crisis, attempts to answer the following inquiries: (i) whether interest rates have played a major role in generating the house price fluctuations in the U.S., (ii) what are the effects of accommodative monetary policy on the economy given banks' excessive risk-taking, and (iii) whether an optimal monetary policy rule can be found for curbing credit-driven economic volatilities in the model economy with unconventional transmission channels operating. By using a decomposition technique and regression analysis, it can be shown that short-term interest rates exert the most potent influence on the evolution of the volatile components of housing prices. One possible explanation for this is that low policy rates for a prolonged period tend to encourage bankers to take on more risk in lending. This transmission channel, labelled as the risk-taking channel, accounts for the gap to some extent between the forecast and the actual impact of monetary policy on the housing market and the overall economy. A looser monetary policy stance can also shift the preference of economic agents toward housing as theoretically and empirically corroborated in the context of choice between durable and nondurable goods. This transmission route is termed the preference channel. If these two channels are operative in the economy, policy makers need to react aggressively to rapid credit growth in order to stabilize the paths of housing prices and output. These findings provide meaningful implications for monetary policy implementation. First of all, central bankers should strive to identify in a timely fashion newly emerging and state-dependent transmission channels of monetary policy, and accurately assess the impact of policy decisions transmitted through these channels. Secondly, the intervention of central banks in the credit or housing market by adjusting policy rates can be optimal, relative to inaction, in circumstances where banks' risk-taking and the preference for housing are overly exuberant.
Book Synopsis Price Expectations and the U.S. Housing Boom by : Pascal Towbin
Download or read book Price Expectations and the U.S. Housing Boom written by Pascal Towbin and published by International Monetary Fund. This book was released on 2015-07-30 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: Between 1996 and 2006 the U.S. has experienced an unprecedented boom in house prices. As it has proven to be difficult to explain the large price increase by observable fundamentals, many observers have emphasized the role of speculation, i.e. expectations about future price developments. The argument is, however, often indirect: speculation is treated as a deviation from a benchmark. The present paper aims to identify house price expectation shocks directly. To that purpose, we estimate a VAR model for the U.S. and use sign restrictions to identify house price expectation, housing supply, housing demand, and mortgage rate shocks. House price expectation shocks are the most important driver of the boom and account for about 30 percent of the real house price increase. We also construct a model-based measure of exogenous changes in price expectations and show that this measure leads a survey-based measure of changes in house price expectations. Our main identification scheme leaves open whether expectation shifts are realistic or unrealistic. In extensions, we provide evidence that price expectation shifts during the boom were primarily unrealistic and were only marginally affected by realistic expectations about future fundamentals.
Book Synopsis Monetary Tightening in the Euro Area by : Paul Egan
Download or read book Monetary Tightening in the Euro Area written by Paul Egan and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we assess the implications for housing supply across the Euro Area of the recent tightening in monetary policy. Official monetary policy rates have risen in response to the sustained period of inflation experienced across countries due to the aftermath of the Covid epidemic and the war in the Ukraine. The increase in official rates has been significant and sustained with the European Central Bank (ECB) increasing rates by over 400 basis points in just one year. At the same time, a number of European economies have noted a relative shortage in housing supply as activity levels struggle to keep pace with the increase in housing demand. A period of monetary tightening has significant implications for the residential property market as it can have an adverse impact through both a demand-side channel (reduced affordability for prospective homeowners) and on the supply-side (increase in funding costs for the construction sector). In this paper we address this question by allowing changes in policy rates to impact the residential market through a number of market interest rates. Using a structural VAR approach, we include information on ECB policy rates and two market interest rates; the mortgage and corporate lending rate. Consequently, the change in the official rate operates through both a demand and a supply-side channel. We then examine the implications for housing supply of the contraction in monetary policy across Euro Area countries. Our results indicate that a monetary shock can have a significantly negative impact on housing investment with the effect varying somewhat across countries. The heterogeneity of the impact raises issues concerning the efficacy and efficiency of the monetary policy transmission mechanism.
Book Synopsis Evidence and Innovation in Housing Law and Policy by : Lee Anne Fennell
Download or read book Evidence and Innovation in Housing Law and Policy written by Lee Anne Fennell and published by Cambridge University Press. This book was released on 2017-08-29 with total page 357 pages. Available in PDF, EPUB and Kindle. Book excerpt: This interdisciplinary volume illuminates housing's impact on both wealth and community, and examines legal and policy responses to current challenges. Also available as Open Access.
Book Synopsis U.S. Housing Policy, Politics, and Economics by : Lawrence A. Souza
Download or read book U.S. Housing Policy, Politics, and Economics written by Lawrence A. Souza and published by Routledge. This book was released on 2021-10-03 with total page 100 pages. Available in PDF, EPUB and Kindle. Book excerpt: The stirrings of reform or more of the same? U.S. Housing Policy, Politics, and Economics shares a stark and urgent message. With a new president in the White House and the economy emerging from its peak pandemic lows, the time is right for transformative federal housing legislation—but only if Congress can transcend partisan divides. Drawing on nearly a century of legislative and policy data, this briefing for scholars and professionals quantifies the effects of Democratic or Republican control of the executive and legislative branches on housing prices and policies nationwide. It exposes the lasting consequences of Congress’ more than a decade of failure to pass meaningful housing laws and makes clear just how narrow the current window for action is. Equal parts analysis and call to arms, U.S. Housing Policy, Politics, and Economics is essential reading for everyone who cares about affordable, accessible housing.
Download or read book Hot Property written by Rob Nijskens and published by Springer. This book was released on 2019-06-14 with total page 220 pages. Available in PDF, EPUB and Kindle. Book excerpt: This open access book discusses booming housing markets in cities around the globe, and the resulting challenges for policymakers and central banks. Cities are booming everywhere, leading to a growing demand for urban housing. In many cities this demand is out-pacing supply, which causes house prices to soar and increases the pressure on rental markets. These developments are posing major challenges for policymakers, central banks and other authorities responsible for ensuring financial stability, and economic well-being in general.This volume collects views from high-level policymakers and researchers, providing essential insights into these challenges, their impact on society, the economy and financial stability, and possible policy responses. The respective chapters address issues such as the popularity of cities, the question of a credit-fueled housing bubble, the role of housing supply frictions and potential policy solutions. Given its scope, the book offers a revealing read and valuable guide for everyone involved in practical policymaking for housing markets, mortgage credit and financial stability.
Book Synopsis Housing and the Financial Crisis by : Edward L. Glaeser
Download or read book Housing and the Financial Crisis written by Edward L. Glaeser and published by University of Chicago Press. This book was released on 2013-08-19 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Conventional wisdom held that housing prices couldn’t fall. But the spectacular boom and bust of the housing market during the first decade of the twenty-first century and millions of foreclosed homeowners have made it clear that housing is no different from any other asset in its ability to climb and crash. Housing and the Financial Crisis looks at what happened to prices and construction both during and after the housing boom in different parts of the American housing market, accounting for why certain areas experienced less volatility than others. It then examines the causes of the boom and bust, including the availability of credit, the perceived risk reduction due to the securitization of mortgages, and the increase in lending from foreign sources. Finally, it examines a range of policies that might address some of the sources of recent instability.
Book Synopsis The Housing Boom and Bust by : Thomas Sowell
Download or read book The Housing Boom and Bust written by Thomas Sowell and published by Basic Books (AZ). This book was released on 2009-05-12 with total page 194 pages. Available in PDF, EPUB and Kindle. Book excerpt: Explains how we got into the current economic disaster that developed out of the economics and politics of the housing boom and bust. The "creative" financing of home mortgages and "creative" marketing of financial securities based on these mortgages to countries around the world, are part of the story of how a financial house of cards was built up--and then collapsed.
Book Synopsis World Economic Outlook, April 2024 by : International Monetary
Download or read book World Economic Outlook, April 2024 written by International Monetary and published by International Monetary Fund. This book was released on 2024-04-16 with total page 202 pages. Available in PDF, EPUB and Kindle. Book excerpt: The latest World Economic Outlook reports economic activity was surprisingly resilient through the global disinflation of 2022–23, despite significant central bank interest rate hikes to restore price stability. Risks to the global outlook are now broadly balanced compared with last year. Monetary policy should ensure that inflation touches down smoothly, while a renewed focus on fiscal consolidation is needed to rebuild room for budgetary maneuver and to ensure debt sustainability. Structural reforms are crucial to revive medium-term growth prospects amid constrained policy space.
Book Synopsis The Credit Channel of Monetary Policy and Housing Markets by : Matteo Iacoviello
Download or read book The Credit Channel of Monetary Policy and Housing Markets written by Matteo Iacoviello and published by . This book was released on 2000 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper tests for the presence of a credit channel (particularly a bank-lending sub-channel) for monetary policy in the housing market. We argue that the importance of this channel for investment in residential housing is highly dependent on the structural features, and particularly the efficiency and institutional organization, of housing finance. We employ a VAR methodology to analyse this issue with respect to the housing markets of four European countries (Finland, Germany, Norway and the United Kingdom), which differ greatly in terms of structural features. Our results are generally consistent with the existence of a broad credit channel, whereas the bank-lending channel seems to be operational only under certain conditions. More importantly, our results are consistent with previous analyses of housing market efficiency, which strongly suggests the existence of a clear relationship between the presence of a credit (bank lending) channel, the efficiency level of housing finance, and the type of institutions that are active in mortgage provision.
