Housing and Monetary Policy

  title={Housing and Monetary Policy},
  author={John B. Taylor},
  journal={PSN: Other Monetary Policy (Topic)},
  • John B. Taylor
  • Published 1 December 2007
  • Economics
  • PSN: Other Monetary Policy (Topic)
Since the mid-1980s, monetary policy has contributed to a great moderation of the housing cycle by responding more proactively to inflation and thereby reducing the boom bust cycle. However, during the period from 2002 to 2005, the short term interest rate path deviated significantly from what this two decade experience would suggest is appropriate. A counterfactual simulation with a simple model of the housing market shows that this deviation may have been a cause of the boom and bust in… 
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