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The Fed's TRAP : A Taylor-type Rule with Asset Prices

Title data

Drescher, Christian ; Erler, Alexander ; Križanac, Damir:
The Fed's TRAP : A Taylor-type Rule with Asset Prices.
In: Journal of Economics and Finance. Vol. 37 (2013) Issue 1 . - pp. 136-149.
ISSN 1055-0925
DOI: https://doi.org/10.1007/s12197-011-9173-z

Official URL: Volltext

Abstract in another language

This paper examines if US monetary policy responds to asset prices. Using real-time data we estimate a Taylor-type rule with an asset price variable. This variable refers to real estate prices, considering that those exhibit an important share in households’ asset portfolio. Moreover, especially real estate prices seem to have a close connection to monetary conditions. To analyze this link we describe price movements in the real estate price index by using a specific cycle dating procedure. The resulting variable indicates quasi real time bull and bear markets, and helps to evaluate the link between real estate market cycles and monetary policy. Our full-sample estimation results give reason to suppose that the US monetary policy responds in a pro-cyclical way to real estate prices. This result is supported by our rolling sub-sample estimations. Additionally, these also point to decelerating countermeasures of the Fed previous to asset price peaks.

Further data

Item Type: Article in a journal
Refereed: Yes
Keywords: Fed; Monetary policy; Taylor rule; Asset Price Cycles; Real Estate
Institutions of the University: Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics I > Chair Economics I - Univ.-Prof. Dr. Bernhard Herz
Faculties
Faculties > Faculty of Law, Business and Economics
Faculties > Faculty of Law, Business and Economics > Department of Economics
Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics I
Result of work at the UBT: Yes
DDC Subjects: 300 Social sciences > 330 Economics
Date Deposited: 31 Mar 2015 07:35
Last Modified: 24 Feb 2016 11:51
URI: https://eref.uni-bayreuth.de/id/eprint/9523