Abstract

http://ssrn.com/abstract=2013795
 
 

References (28)



 
 

Footnotes (17)



 


 



Monetary Policy Transmission in a Model with Animal Spirits and House Price Booms and Busts


Peter Bofinger


University of Würzburg - Institute of Economics and Social Sciences

Sebastian Debes


University of Wuerzburg

Johannes Gareis


affiliation not provided to SSRN

Eric Mayer


affiliation not provided to SSRN

January 2012

CEPR Discussion Paper No. DP8804

Abstract:     
Can monetary policy trigger pronounced boom-bust cycles in house prices and create persistent business cycles? We address this question by building heuristics into an otherwise standard DSGE model. As a result, monetary policy sets off waves of optimism and pessimism ('animal spirits') that drive house prices, which, in turn, have strong repercussions on the business cycle. We compare our findings to a standard model with rational expectations by means of impulse responses. We suggest that a standard Taylor rule is not well-suited to maintain macroeconomic stability. Instead, an augmented rule that incorporates house prices is shown to be superior.

Number of Pages in PDF File: 40

Keywords: animal spirits, housing markets, monetary policy

JEL Classification: D83, E32, E52

working papers series


Date posted: March 1, 2012  

Suggested Citation

Bofinger, Peter and Debes, Sebastian and Gareis, Johannes and Mayer, Eric, Monetary Policy Transmission in a Model with Animal Spirits and House Price Booms and Busts (January 2012). CEPR Discussion Paper No. DP8804. Available at SSRN: http://ssrn.com/abstract=2013795

Contact Information

Peter Bofinger (Contact Author)
University of Würzburg - Institute of Economics and Social Sciences ( email )
Sanderring 2
Wuerzburg, 97070
Germany
+49 931 312 944/5 (Phone)
+49 931 312 775 (Fax)
Sebastian Debes
University of Wuerzburg ( email )
Sanderring 2
Wuerzburg, D-97070
Germany
Johannes Gareis
affiliation not provided to SSRN ( email )
Eric Mayer
affiliation not provided to SSRN ( email )
Feedback to SSRN


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References:  28
Footnotes:  17

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