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The Housing Bubble: How Much Blame Does the Fed Really Deserve?

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  • William Miles

Abstract

Two recent empirical papers have blamed the Fed for the latest boom and bust in housing. Neither study includes long-term interest rates, which are more affected by global factors than the federal funds rate (FFR). In this paper, I include both the mortgage rate and the FFR as determinants of housing variables. The results indicate the long-term rate has independent and sometimes greater predictive power for housing than the FFR, especially in recent years. Finally, I demonstrate that the mortgage rate does not simply proxy for monetary policy—the impact of the FFR on long-term rates has also fallen over time.

Suggested Citation

  • William Miles, 2014. "The Housing Bubble: How Much Blame Does the Fed Really Deserve?," Journal of Real Estate Research, Taylor & Francis Journals, vol. 36(1), pages 41-58, January.
    • Handle: RePEc:taf:rjerxx:v:36:y:2014:i:1:p:41-58
    DOI: 10.1080/10835547.2014.12091380
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