This paper analyzes global dynamics in an overlapping generations general equilibrium model with housing-wealth effects. It demonstrates that monetary policy cannot burst rational bubbles in the housing market. Under monetary policy rules of the Taylor-type, there exist global self-fulfilling paths of house prices along a heteroclinic orbit connecting multiple equilibria. From bifurcation analysis, the orbit features a boom (bust) in house prices when monetary policy is more (less) active. The paper also proves that booms or busts cannot be ruled out by interest-rate feedback rules responding to both inflation and house prices.

Brito, P., Marini, G., Piergallini, A. (2016). House Prices and Monetary Policy. STUDIES IN NONLINEAR DYNAMICS AND ECONOMETRICS, 20(3), 251-277 [10.1515/snde-2014-0072].

House Prices and Monetary Policy

Marini, G;Piergallini, A
2016-03-01

Abstract

This paper analyzes global dynamics in an overlapping generations general equilibrium model with housing-wealth effects. It demonstrates that monetary policy cannot burst rational bubbles in the housing market. Under monetary policy rules of the Taylor-type, there exist global self-fulfilling paths of house prices along a heteroclinic orbit connecting multiple equilibria. From bifurcation analysis, the orbit features a boom (bust) in house prices when monetary policy is more (less) active. The paper also proves that booms or busts cannot be ruled out by interest-rate feedback rules responding to both inflation and house prices.
mar-2016
Pubblicato
Rilevanza internazionale
Articolo
Esperti anonimi
Settore SECS-P/01 - ECONOMIA POLITICA
English
Con Impact Factor ISI
Brito, P., Marini, G., Piergallini, A. (2016). House Prices and Monetary Policy. STUDIES IN NONLINEAR DYNAMICS AND ECONOMETRICS, 20(3), 251-277 [10.1515/snde-2014-0072].
Brito, P; Marini, G; Piergallini, A
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2108/218783
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