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Monetary Policy and the Housing Market: A Structural Factor Analysis
Author(s) -
Luciani Matteo
Publication year - 2015
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.2318
Subject(s) - economics , bust , recession , boom , great recession , monetary policy , dynamic factor , business cycle , quantitative easing , monetary economics , federal funds , macroeconomics , keynesian economics , econometrics , central bank , environmental engineering , engineering
Summary This paper studies the role of the Federal Reserve's policy in the recent boom and bust of the housing market, and in the ensuing recession. By estimating a structural dynamic factor model on a panel of 109 US quarterly variables from 1982 to 2010, we find that, although the Federal Reserve's policy between 2002 and 2004 was slightly expansionary, its contribution to the recent housing cycle was negligible. We also show that a more restrictive policy would have smoothed the cycle but not prevented the recession. We thus find no role for the Federal Reserve in causing the recession. Copyright © 2013 John Wiley & Sons, Ltd.