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The dynamic impact of monetary policy on regional housing prices in the US: Evidence based on factor-augmented vector autoregressions

Manfred M. Fischer, Florian Huber, Michael Pfarrhofer, Petra Staufer-Steinnocher

arXiv 16 Feb 2018 · Econometrics

arXiv:1802.05870 · PDF · DOI · OpenAlex · Extracted main text

Abstract

In this study interest centers on regional differences in the response of housing prices to monetary policy shocks in the US. We address this issue by analyzing monthly home price data for metropolitan regions using a factor-augmented vector autoregression (FAVAR) model. Bayesian model estimation is based on Gibbs sampling with Normal-Gamma shrinkage priors for the autoregressive coefficients and factor loadings, while monetary policy shocks are identified using high-frequency surprises around policy announcements as external instruments. The empirical results indicate that monetary policy actions typically have sizeable and significant positive effects on regional housing prices, revealing differences in magnitude and duration. The largest effects are observed in regions located in states on both the East and West Coasts, notably California, Arizona and Florida.

Citation extraction

32
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Most heavily cited references

The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.

ReferenceIntensityMentionsSectionsMain text
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2Fratantoni M and Schuh S (2003) Monetary policy, housing, and hetero… Journal of Money, Credit, and Banking 34(4), 557–5891.00053100%
3Gilchrist S and Zakrajsek E (2012) Credit spreads and business cycle… The American Economic Review 102(4), 1692–17200.73732100%
4Griffin JE and Brown PJ (2010) Inference with normal-gamma prior dis… Bayesian Analysis 5(1), 171–1880.73732100%
5Huber F and Feldkircher M (2017) Adaptive shrinkage in Bayesian vect… Journal of Business & Economic Statistics, doi: https://doi.org/10.1080/07350015.2016.12562170.64422100%
6Vargas-Silva C (2008) The effect of monetary policy on housing: a fa… Applied Economics Letters 15(10), 749–7520.58531100%
7Moench E and Ng S (2011) A hierarchical factor analysis of U.S. hous… The Econometrics Journal 14(1), C1–C240.51121100%
8Bernanke BS, Boivin J and Eliasz P (2005) Measuring the effects of m… The Quarterly Journal of Economics 120(1), 387–4220.51121100%
9Paul P (2018) The time-varying effect of monetary policy on asset prices0.51121100%
10Baffoe-Bonnie J (1998) The dynamic impact of macroeconomic aggregate… The Journal of Real Estate Finance and Economics 17(2), 179–1970.40511100%

Showing the top 10 of 32 scored citations.