Monetary policy and The global housing bubble

Jane Dokko, Brian M. Doyle, Michael T. Kiley, Jinill Kim, Shane Sherlund, Jae Sim, Skander Van Den Heuvel

Research output: Contribution to journalArticle

32 Citations (Scopus)

Abstract

What caused the housing boom of the 2000s? A number of researchers have suggested that loose monetary policy during the first half of the 2000s was a primary cause of the substantial run-up in house prices in many countries. However, using a common statistical approach, we find that monetary policy was not the main factor. That should not be surprising: Although low interest rates raise house prices, the increase in prices during the mid-2000s was much larger than the historical relationship between the two variables would suggest. Instead, we investigate further the link between the marked loosening in terms and standards for mortgage credit and the most rapid increases in house prices. This link provides some evidence for a story where credit provision and the demand for housing fed on each other and helped spur the housing boom. Our work suggests a greater role for macroprudential regulation rather than monetary policy in managing asset price booms. - Jane Dokko, Brian M. Doyle, Michael T. Kiley, Jinill Kim, Shane Sherlund, Jae Sim and Skander Van Den Heuvel

Original languageEnglish
Pages (from-to)233-283
Number of pages51
JournalEconomic Policy
Volume26
Issue number66
DOIs
Publication statusPublished - 2011 Apr 1

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monetary policy
bubble
credit provision
interest rate
den
price
Monetary policy
House prices
Housing bubble
Credit

ASJC Scopus subject areas

  • Economics and Econometrics
  • Management, Monitoring, Policy and Law

Cite this

Dokko, J., Doyle, B. M., Kiley, M. T., Kim, J., Sherlund, S., Sim, J., & Van Den Heuvel, S. (2011). Monetary policy and The global housing bubble. Economic Policy, 26(66), 233-283. https://doi.org/10.1111/j.1468-0327.2011.00262.x

Monetary policy and The global housing bubble. / Dokko, Jane; Doyle, Brian M.; Kiley, Michael T.; Kim, Jinill; Sherlund, Shane; Sim, Jae; Van Den Heuvel, Skander.

In: Economic Policy, Vol. 26, No. 66, 01.04.2011, p. 233-283.

Research output: Contribution to journalArticle

Dokko, J, Doyle, BM, Kiley, MT, Kim, J, Sherlund, S, Sim, J & Van Den Heuvel, S 2011, 'Monetary policy and The global housing bubble', Economic Policy, vol. 26, no. 66, pp. 233-283. https://doi.org/10.1111/j.1468-0327.2011.00262.x
Dokko J, Doyle BM, Kiley MT, Kim J, Sherlund S, Sim J et al. Monetary policy and The global housing bubble. Economic Policy. 2011 Apr 1;26(66):233-283. https://doi.org/10.1111/j.1468-0327.2011.00262.x
Dokko, Jane ; Doyle, Brian M. ; Kiley, Michael T. ; Kim, Jinill ; Sherlund, Shane ; Sim, Jae ; Van Den Heuvel, Skander. / Monetary policy and The global housing bubble. In: Economic Policy. 2011 ; Vol. 26, No. 66. pp. 233-283.
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