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The dynamic impact of monetary policy on regional housing prices in the US: Evidence based on factor-augmented vector autoregressions

Fischer, Manfred M. and Huber, Florian and Pfarrhofer, Michael and Staufer-Steinnocher, Petra (2018) The dynamic impact of monetary policy on regional housing prices in the US: Evidence based on factor-augmented vector autoregressions. Working Papers in Regional Science, 2018/01. WU Vienna University of Economics and Business, Vienna.

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Abstract

In this study interest centers on regional differences in the response of housing prices to monetary policy shocks in the US. We address this issue by analyzing monthly home price data for metropolitan regions using a factor-augmented vector autoregression (FAVAR) model. Bayesian model estimation is based on Gibbs sampling with Normal-Gamma shrinkage priors for the autoregressive coefficients and factor loadings, while monetary policy shocks are identified using high-frequency surprises around policy announcements as external instruments. The empirical results indicate that monetary policy actions typically have sizeable and significant positive effects on regional housing prices, revealing differences in magnitude and duration. The largest effects are observed in regions located in states on both the East and West Coasts, notably California, Arizona and Florida.

Item Type: Paper
Keywords: Regional housing prices, metropolitan regions, Bayesian estimation, high-frequency identification
Classification Codes: JEL C11, C32, E52, R31
Divisions: Departments > Sozioökonomie > Wirtschaftsgeographie und Geoinformatik > Fischer
Depositing User: ePub Administrator
Date Deposited: 16 Feb 2018 10:02
Last Modified: 08 Jul 2018 07:55
FIDES Link: https://bach.wu.ac.at/d/research/results/86506/
URI: http://epub.wu.ac.at/id/eprint/6065

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