Monetary Policy and Regional House-Price Appreciation

47 Pages Posted: 14 Dec 2016

See all articles by Daniel Cooper

Daniel Cooper

Federal Reserve Bank of Boston

María José Luengo‐Prado

Federal Reserve Banks - Federal Reserve Bank of Boston

Giovanni Olivei

Federal Reserve Bank of Boston

Date Written: 2016-11-30

Abstract

This paper examines the link between monetary policy and house-price appreciation by exploiting the fact that monetary policy is set at the national level, but has different effects on state-level activity in the United States. This differential impact of monetary policy provides an exogenous source of variation that can be used to assess the effect of monetary policy on state-level housing prices. Policy accommodation equivalent to 100 basis points on an equilibrium real federal funds rate basis raises housing prices by about 2.5 percent over the next two years. However, the estimated effect increases to 6.6 percent during the early 2000s housing boom.

JEL Classification: E43, E44, E52, E58

Suggested Citation

Cooper, Daniel H. and Luengo-Prado, Maria Jose and Olivei, Giovanni, Monetary Policy and Regional House-Price Appreciation (2016-11-30). FRB of Boston Working Paper No. 16-18. Available at SSRN: https://ssrn.com/abstract=2884608

Daniel H. Cooper (Contact Author)

Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States
617-973-4220 (Phone)

Maria Jose Luengo-Prado

Federal Reserve Banks - Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

Giovanni Olivei

Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

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