The Impact of the Responsiveness of Monetary Policy on the Housing Market.

摘要

Taylor (2007) claims that a not too responsive monetary policy was responsible for the housing boom between 2001 and 2005 and the subsequent financial crisis because it results in the low interest rate during 2002-2004. Using a reduced form model, he shows that the economic situation would have been improved if a more responsive monetary policy had been implemented. In this paper, we set up a two-sector New Keynesian DSGE model, estimated using Bayesian techniques, to evaluate Taylor's hypotheses. First, we did identify a less responsive monetary policy after 2000. Our results partially support Taylor's hypothesis, that a more responsive monetary policy can stabilize the housing price during the transition period of 2003-2008, the period from the boom to the bust. But it is not the reason of low interest rate during 2002-2004. Second, a more responsive monetary policy would have generated smaller responses of the real variables to shocks, except for the technology shock in the housing sector. One of the differences with the literature is that we introduce housing market segmentation through different discount factors, leading to a housing market that is occupied only by constrained (impatient) households, which actually makes the impulses responses distinguishable under different responsiveness of the monetary policy. The impulse responses to monetary policy shocks and cost push shocks under this assumption deliver unconventional results. In particular, a contractionary monetary policy shock and a positive cost push shock will bring down the interest rate and inflation respectively. Moreover, the real housing price is reduced with these two shocks, leading to more binding constraints for the impatient households. To clear the housing market, the interest rate is reduced, automatically taxing patient lenders and subsidizing impatient borrowers. The theoretical variance decomposition indicates that the monetary policy shock explains about 25% of the variances in housing prices and the cost push shock explains about 58%, while the variance in the housing output is mainly explained by the technology shock in housing sector. Our conclusion is that monetary policy shocks, rather than the responsiveness of monetary policy, contributed to the housing boom, but with limited effect.;We experiment on monetary policies with different response rates to the housing price. By comparing the welfare changes, we found that the patient households always gain from the new policies. But the impatient households only gain under moderate responses to the housing price. When the monetary policy overreacts to the housing price, they will be worse off because of the reduced utility level even though the utility volatility is smoothed over time.