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Measuring monetary policy’s effect on house prices

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Abstract

Central banks debate whether using monetary policy to foster financial stability through house prices is advisable. Although a rise in interest rates tends to lower house prices, it may come at a significant cost through reduced economic output and inflation. This implies a very costly tradeoff when macroeconomic and financial stability goals are in conflict. The following is adapted from a presentation by the president and CEO of the Federal Reserve Bank of San Francisco to the Bank Indonesia?BIS Conference in Jakarta on August 20.

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  • John C. Williams, 2015. "Measuring monetary policy’s effect on house prices," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfel:00068
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    References listed on IDEAS

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    1. Marek Jarocinski & Frank Smets, 2008. "House prices and the stance of monetary policy," Review, Federal Reserve Bank of St. Louis, vol. 90(Jul), pages 339-366.
    2. Iacoviello, Matteo & Minetti, Raoul, 2008. "The credit channel of monetary policy: Evidence from the housing market," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 69-96, March.
    3. Katrin Assenmacher & Stefan Gerlach, 2008. "Financial Structure and the Impact of Monetary Policy on Asset Prices," Working Papers 2008-16, Swiss National Bank.
    4. 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.
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    Cited by:

    1. Ragna Alstadheim & Ørjan Robstad & Nikka Husom Vonen, 2017. "Financial imbalances, crisis probability and monetary policy in Norway," Working Paper 2017/21, Norges Bank.
    2. Denis Gorea & Oleksiy Kryvtsov & Marianna Kudlyak, 2022. "House Price Responses to Monetary Policy Surprises: Evidence from the U.S. Listings Data," Working Paper Series 2022-16, Federal Reserve Bank of San Francisco.

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