Discussion of Taming the Real Estate Beast: The Effects of Monetary and Macroprudential Policies on Housing Prices and Credit

Kuttner and Shim take on a very ambitious and worthwhile task, for which they deserve to be congratulated. The questions that they pose, and the answers they seek, are central to the design of macroprudential policy in the post-crisis era. Their paper brings together a very large dataset, spanning more than 50 economies over three decades. And it carefully catalogues all the policy measures that might be deemed ‘macroprudential’ over that period – a major undertaking in itself. These policy measures fall into three groups: non-interest rate monetary policy measures, prudential tools and fiscal actions. Using an empirical variant of Poterba’s (1984) user cost model, Kuttner and Shim uncover statistically significant effects on housing prices (and credit growth) when the authorities wield these tools.