Financial Market Liberalization, Monetary Policy, And Housing Sector Dynamics

Monetary Policy and the Financial Sector

In this paper we study whether central banks should react to financial sector variables in their policy rules. We find that responding to asset prices has no impact and does not increase the likelihood of equilibrium indeterminacy. However, a response to entrepreneurial net worth increases the likelihood of determinacy in current and forward-looking policy rules.

Housing and Monetary Policy

When you look back over the past half-century in the United States you see a remarkable secular change in the housing cycle. Most importantly, the volatility or average size of the fluctuations in residential construction declined. The change occurred in the early 1980s. For example, compare two periods, the first before the early 1980s and the second since the 1980s. In the earlier period the ...

Financial Liberalization and Policy Challenges

Learning about monetary policy rules when the housing market matters

In this paper we study a general equilibrium model with a housing market, and use stability under adaptive learning as a criterion to evaluate monetary policy rules. An important feature of the model is that there exist credit-constrained borrowers who use their housing assets as collateral to finance purchases. We evaluate both conventional Taylor rules and rules that incorporate other targets...

Financial Market Efficiency and the Effectiveness of Monetary Policy

mprovements in information processing technology and deregulation, among other forces, are profoundly transforming the financial sector of the United States and other advanced economies. Many of these changes are likely to improve the efficiency of financial intermediation, in the sense that the dispersion of valuations of claims to future payments across different individuals and institutions ...