Housing markets, monetary policy, and the international co‐movement of housing bubbles

Abstract

We analyze whether there was co‐movement in bubbles at the international level from the mid‐1990s to 2018 using a data set of developed and emerging economies. We first identify the markets that were more prone to volatility and speculation before the crisis. Second, we determine and compare the responses of bubbles in housing markets to monetary policy in a Bayesian time‐varying framework. We then study the co‐movement of bubble responses to monetary shocks before and after the crisis using a dynamic factor model. This approach allows us to disentangle a common global factor from factors specific to high/low speculative housing markets.

ECB monetary policy and commodity prices

“…The empirical study of Jawadi et al (2017) also show that commodity prices are responsive to M2 of the Fed since commodity prices respond immediately and positively to the expansionary monetary policy shocks. The interest rate variable used for capturing the unconventional period varies among the researchers due to the zero lower bond (ZLB), where some studies relied on the interest rate spread (Chen et al, 2016;Hammoudeh et al, 2015;Hanabusa, 2017) while others (Caraiani & Calin, 2020;Hafemann & Tillmann, 2017;Hájek & Horváth, 2018) preferred to use the shadow policy rates introduced either by Wu and Xia (2016) or by Krippner (2013).…”