Optimal monetary policy during endogenous housing-market boom-bust cycles

Arbeitspapier

This paper uses a small-open economy model for the Canadian economy to examine the optimal Taylor-type monetary policy rule that stabilizes output and inflation in an environment where endogenous boom-bust cycles in house prices can occur. The model shows that boom-bust cycles in house prices emerge when credit-constrained mortgage borrowers expect that future house prices will rise and this expectation is neither shared by savers nor realized ex-post. These boom-bust cycles replicate the stylized features of housing-market boom-bust cycles in industrialized countries. In an environment where mortgage borrowers are occasionally over-optimistic, the central bank should be less responsive to inflation, more responsive to output, and slower to adjust the nominal policy interest rate. This optimal monetary policy rule dampens endogenous boom-bust cycles in house prices, but prolongs inflation target horizons due to weak policy reactions to inflation fluctuations after fundamental shocks.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Bank of Canada Working Paper ; No. 2009-32

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Financial Markets and the Macroeconomy ; Monetary Policy
• Thema: Credit and credit aggregates ; Financial stability ; Inflation targets ; Konjunktur ; Immobilienpreis ; Geldpolitik ; Gesamtwirtschaftliche Produktion ; Inflationsrate ; Taylor-Regel ; Kleines-offenes-Land ; Kanada

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Tomura, Hajime
• Ereignis: Veröffentlichung
• (wer): Bank of Canada
• (wo): Ottawa
• (wann): 2009

Weitere Informationen

• DOI: doi:10.34989/swp-2009-32
• Handle: http://hdl.handle.net/10419/53941
• Letzte Aktualisierung: 20.09.2024, 08:23 MESZ