Monetary Policy and the Housing Market: A Structural Factor Analysis
Version of Record online: 18 APR 2013
Copyright © 2013 John Wiley & Sons, Ltd.
Journal of Applied Econometrics
Volume 30, Issue 2, pages 199–218, March 2015
How to Cite
2015), Monetary Policy and the Housing Market: A Structural Factor Analysis, J. Appl. Econ., 30, pages 199–218. doi: 10.1002/jae.2318(
- Issue online: 2 MAR 2015
- Version of Record online: 18 APR 2013
- Manuscript Revised: 31 OCT 2012
- Manuscript Received: 7 APR 2010
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.