Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/129077 
Year of Publication: 
2016
Series/Report no.: 
FinMaP-Working Paper No. 58
Publisher: 
Kiel University, FinMaP - Financial Distortions and Macroeconomic Performance, Kiel
Abstract: 
In this paper we propose a time-varying parameter VAR model for the housing market in the United States, the United Kingdom, Japan and the Euro Area. For these four economies, we answer the following research questions: (i) How can we evaluate the stance of monetary policy when the policy rate hits the zero lower bound? (ii) Can developments in the housing market still be explained by policy measures adopted by central banks? (iii) Did central banks succeed in mitigating the detrimental impact of the financial crisis on selected housing variables? We analyze the relationship between unconventional monetary policy and the housing markets by using the shadow interest rate estimated by Krippner (2013b). Our findings suggest that the monetary policy transmission mechanism to the housing market has not changed with the implementation of quantitative easing or forward guidance, and central banks can affect the composition of an investor's portfolio through investment in housing. A counterfactual exercise provides some evidence that unconventional monetary policy has been particularly successful in dampening the consequences of the financial crisis on housing markets in the United States, while the effects are more muted in the other countries considered in this study.
Subjects: 
Zero Lower Bound
Shadow interest rate
Housing Market
Time-varying parameter VAR
JEL: 
C32
E23
E32
Document Type: 
Working Paper

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