Monetary Policy and the Housing Market: A Structural Factor Analysis

23 Pages Posted: 22 Jun 2010 Last revised: 29 Oct 2012

See all articles by Matteo Luciani

Matteo Luciani

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: October 2012

Abstract

This paper studies the role of the Federal Reserve's policy in the recent boom and bust of the housing market, and in the ensuing recession. By estimating a Structural Dynamic Factor model on a panel of 109 US quarterly variables from 1982 to 2010, we find that, although the Federal Reserve's policy between 2002 and 2004 was slightly expansionary, its contribution to the recent housing cycle was negligible. We also show that a more restrictive policy would have smoothed the cycle but not prevented the recession. We thus find no role for the Federal Reserve in causing the recession.

Keywords: Structural Factor Model, Business Cycle, Monetary Policy, Housing

JEL Classification: C32, E32, E52, R2

Suggested Citation

Luciani, Matteo, Monetary Policy and the Housing Market: A Structural Factor Analysis (October 2012). Available at SSRN: https://ssrn.com/abstract=1628332 or http://dx.doi.org/10.2139/ssrn.1628332

Matteo Luciani (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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Washington, DC 20551
United States

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