Download This PaperThe Danger in Using Monetary Policy to Address Housing Affordability: A Lesson from the Great Recession
11 Pages Posted: 7 Apr 2020
Date Written: March 2019
Abstract
Loose monetary policy has been widely blamed for high home prices and for the debt-fueled consumption that they funded. Critics, and even Federal Reserve (Fed) policymakers, generally agree that monetary policy should have been tightened sooner. But this is the wrong conclusion. In fact, monetary policy was powerless to counteract the debt-fueled consumption of the boom period, and the bust was only inevitable because the Fed tried to solve a problem that it could not functionally solve with tighter monetary policy.
Keywords: Federal Reserve, Financial Crisis, housing policy, federal debt, monetary policy, economic policy, household debt, housing supply
JEL Classification: R20, R31
Suggested Citation: Suggested Citation
Kevin Erdmann (Contact Author)
The Mercatus Center at George Mason University ( email )
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Arlington, VA 22201
United States