Discussion of House Prices, Money, Credit, and the Macroeconomy by Charles Goodhart and Boris Hofmann
City University London - Department of Economics; Bank of England
Oxford Review of Economic Policy, Vol. 24, Issue 1, pp. 206-209, 2008
Goodhart and Hoffman aim to examine causal and other links between house prices, liquidity, and activity, and this note comments on their results. One part of the mechanism is via wealth-but arguably house-price changes have little net impact on wealth, although there are collateral effects. The authors clearly establish strong empirical links between the variables examined. The main practical issues are to do with identification of the source of shocks and therefore on the interpretation of the results.
Keywords: house prices, vector autoregressions (VARs), identification
JEL Classification: E21, E22, E31, E32, E44, E47, E50, R21, R31Accepted Paper Series
Date posted: July 2, 2008
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