Monetary Policy and Housing Sector Dynamics in a Large-Scale Bayesian Vector Autoregressive Model

International Journal of Strategic Property Management, April 2012

25 Pages Posted: 30 Jun 2009 Last revised: 4 Feb 2013

See all articles by Rangan Gupta

Rangan Gupta

University of Pretoria - Department of Economics

Marius Jurgilas

Norges Bank

Alain Kabundi

University of Johannesburg - Department of Economics

Stephen M. Miller

University of Nevada, Las Vegas - Department of Economics; University of Connecticut - Department of Economics

Date Written: June 24, 2009

Abstract

Our paper considers this channel whereby monetary policy, a Federal funds rate shock, affects the dynamics of the US housing sector. The analysis uses impulse response functions obtained from a large-scale Bayesian Vector Autoregression (LBVAR) model that incorporates 143 monthly macroeconomic variables over the period of 1986:01 to 2003:12, including 21 variables relating to the housing sector at the national and four census regions. We find at the national level that housing starts, housing permits, and housing sales fall in response to the tightening of monetary policy. Housing sales reacts more quickly and sharply than starts and permits and exhibits more duration. Housing prices show the weakest response to the monetary policy shock. At the regional level, we conclude that the housing sector in the South drives the national data. The responses in the West differ the most from the other regions, especially for the impulse responses of housing starts and permits.

Keywords: monetary policy, housing sector dynamics, large-scale BVAR models

JEL Classification: C32, R31

Suggested Citation

Gupta, Rangan and Jurgilas, Marius and Kabundi, Alain and Miller, Stephen M., Monetary Policy and Housing Sector Dynamics in a Large-Scale Bayesian Vector Autoregressive Model (June 24, 2009). International Journal of Strategic Property Management, April 2012, Available at SSRN: https://ssrn.com/abstract=1425163

Rangan Gupta

University of Pretoria - Department of Economics ( email )

Lynnwood Road
Hillcrest
Pretoria, 0002
South Africa

Marius Jurgilas

Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107
Norway

Alain Kabundi

University of Johannesburg - Department of Economics ( email )

P.O. Box 524
Auckland Park 2006, Johannesburg
South Africa

Stephen M. Miller (Contact Author)

University of Nevada, Las Vegas - Department of Economics ( email )

4505 S. Maryland Parkway
Box 456005
Las Vegas, NV 89154
United States
702-895-3776 (Phone)
702-895-1354 (Fax)

HOME PAGE: http://faculty.unlv.edu/smiller/

University of Connecticut - Department of Economics

365 Fairfield Way, U-1063
Storrs, CT 06269-1063
United States

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