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House prices, consumption, and monetary policy: a financial accelerator approach

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Author Info
Aoki, Kosuke (Universitat Pompeu Fabra)
James Proudman
Gertjan Vlieghe

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Abstract

We consider a general equilibrium model where asymmetric information problems create frictions in credit markets used by households. In our economy, houses serve as collateral to lower the agency costs related to borrowing. We show that this amplifies the effect of monetary policy shocks on housing investment, house prices and consumption. We consider the effect of a structural change in credit markets that lowers the transaction costs of additional borrowing against housing equity. We show that such a change would increase the effect of monetary policy shocks on consumption, but would decrease the effect on house prices and housing investment.

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Publisher Info
Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2003 with number 7.

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Date of creation: 04 Jun 2003
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Handle: RePEc:ecj:ac2003:7

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Web page: http://www.res.org.uk/society/annualconf.asp
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Related research
Keywords: house prices; credit frictions; monetary policy; financial accelerator; consumption;

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Find related papers by JEL classification:
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
R21 - Urban, Rural, and Regional Economics - - Household Analysis - - - Housing Demand

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