Leaning against house prices: A structural VAR investigation

Benati, Luca (2021). Leaning against house prices: A structural VAR investigation. Journal of monetary economics, 118, pp. 399-412. Elsevier 10.1016/j.jmoneco.2020.12.002

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Evidence from monetary VARs suggests that in the U.S., Canada, and the U.K. the impact of monetary shocks on real house prices is about three to five times as large as that on real GDP. Although these trade-offs are not manifestly unfavorable, in the light of the large differences in the magnitudes of house prices and GDP fluctuations, a monetary policy of leaning against the former would inevitably entail significant losses in the latter. I use the identified VARs in order to explore the corresponding trade-offs associated with a monetary policy of weakly, but systematically leaning against house prices. Results from ‘modest’ (in the sense of Leeper and Zha, 2003) policy counterfactuals suggest that, in population, the impact on real house prices is about three times as large as that on real GDP for all of the three countries. Within the specific context of the upsurge in U.S. house prices which pre-dated the financial crisis, a shortfall of one per cent of GDP would have been associated with a decline in real house prices by about four per cent.

Item Type:

Journal Article (Original Article)

Division/Institute:

03 Faculty of Business, Economics and Social Sciences > Department of Economics

UniBE Contributor:

Benati, Luca

Subjects:

300 Social sciences, sociology & anthropology > 330 Economics

ISSN:

0304-3932

Publisher:

Elsevier

Language:

English

Submitter:

Dino Collalti

Date Deposited:

19 Apr 2021 16:22

Last Modified:

19 Apr 2021 16:22

Publisher DOI:

10.1016/j.jmoneco.2020.12.002

BORIS DOI:

10.48350/154036

URI:

https://boris.unibe.ch/id/eprint/154036

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