Can interest rates really control house prices? Effectiveness and implications for macroprudential policy

Journal of Banking and Finance

Volumn 47, Issue 1, 2014, Pages 15-28

  Shi, Song ^a   Jou, Jyh Bang ^b   Tripe, David ^a  

^a MASSEY UNIVERSITY   (New Zealand)

^b NATIONAL TAIWAN UNIVERSITY   (Taiwan)

Author keywords

House price bubbles; Housing market; Monetary policy; Mortgage lending rates

Indexed keywords

EID: 84904861854     PISSN: 03784266     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jbankfin.2014.06.012     Document Type: Article

References (43)

1. Bernanke B., Gertler M. Inside the black box: the credit channel of monetary policy transmission. Journal of Economic Perspectives 1995, 9:27-48.
2. Blanchard, O., Watson, M., 1982. Bubbles, rational expectations and financial markets, NBER Working Paper Series No. 945. National Bureau of Economic Research, Cambridge, MA.
3. Bollard A., Smith M. Major global developments in the new millenium. Reserve Bank of New Zealand Bulletin 2006, 69:26-39.
4. Campbell S.D., Davis M.A., Gallin J., Martin R.F. What moves housing markets: a variance decomposition of the rent-price ratio. Journal of Urban Economics 2009, 66:90-102.
5. Case K.E., Shiller R.J. Prices of Single-Family Homes Since 1970: New Indexes for Four Cities 1987, National Bureau of Economics Research, Cambridge, MA.
6. Campbell J.Y., Shiller R.J. The dividend-price ratio and expectations of future dividends and discount factors. Review of Financial Studies 1988, 1:195-227.
7. Campbell J.Y., Shiller R.J. Stock prices, earnings, and expected dividends. Journal of Finance 1988, 43:661-676.
8. Chow G.C. Tests of equality between sets of coefficients in two linear regressions. Econometrica 1960, 28(3):591-605.
9. Clapham E., Englund P., Quigley J.M., Redfearn C.L. Revisiting the past and settling the score: index revision for house price derivatives. Real Estate Economics 2006, 34:275-302.
10. Clapp J.M., Giaccotto C. Repeated sales methodology for price trend estimation: an evaluation of sample selectivity. Journal of Real Estate Finance and Economics 1992, 5:357-374.
11. Clayton J. Rational expectations, market fundamentals and housing price volatility. Real Estate Economics 1996, 24:441-470.
12. Cottarelli C., Kourelis A. Financial structure, bank lending rates, and the transmission mechanism of monetary policy. IMF Staff Papers 1994, 41:587-623.
13. Crowe C., Dell'Ariccia G., Igan D., Rabanal P. How to deal with real estate booms: lessons from country experiences. Journal of Financial Stability 2013, 9:300-319.
14. Dokko J., Doyle B.M., Kiley M.T., Kim J., Sherlund S., Sim J., Van Den Heuvel S. Monetary policy and the global housing bubble. Economic Policy 2011, 26:237-287.
15. Follain J.R. Mortgage choice. AREUEA Journal 1990, 18:125-144.
16. Glaeser, E., Gottlieb, J., Gyourko, J., 2010. Can cheap credit explain the housing boom?, NBER Working Paper No. 16230. National Bureau of Economics Research, Cambridge, MA.
17. Grimes A., Aitken A. Housing supply, land costs and price adjustment. Real Estate Economics 2010, 38(2):325-353.
18. Hargreaves B., Shi S. A total returns index for investor housing in New Zealand. Pacific Rim Property Research Journal 2005, 11:253-267.
19. Haurin D.R., Hendershott P.H. House price indexes: Issues and results. AREUEA Journal 1991, 19:259-269.
20. Hendershott P.H., Slemrod J. Taxes and the user cost of capital for owner-occupied housing. AREUEA Journal 1983, 10:375-393.
21. Himmelberg C., Mayer C., Sinai T. Assessing High House Prices: Bubbles, Fundamentals and Misperceptions 2005, National Bureau of Economic Research, Cambridge, MA.
22. Huang, C.-C., Elliffe, C., 2011. Hard to argue with benefits of capital gains tax, New Zealand Herald, Auckland, New Zealand.
23. Hunt C. The last financial cycle and the case for macro-prudential intervention. Reserve Bank of New Zealand Bulletin 2013, 76(2):3-16.
24. Igan, D., Loungani, P., 2012. Global housing cycles. IMF Working Paper No. WP/12/17.
25. Khandani, A., Lo, A.W., Merton, R.C., 2009. Systemic risk and the refinancing ratchet effect, NBER Working Paper No.15362. National Bureau of Economic Research, Cambridge, MA.
26. Khim V., Liew S. Which lag selection criteria should we employ?. Economics Bulletin 2004, 3(33):1-9.
27. Leung C.K.Y., Shi S., Tang E.C.H. Commodity house prices. Regional Science and Urban Economics 2013, 43:875-887.
28. Liu M.H., Margaritis D., Tourani-Rad A. Monetary policy transparency and pass-through of retail interest rates. Journal of Banking & Finance 2008, 32:501-511.
29. Lucas R.E., Sargent T.J. Rational Expectations and Econometric Practice 1981, The University of Minnesota Press, Minneapolis.
30. McDonald J.F., Stokes H.H. Monetary policy and the housing bubble. Journal of Real Estate Finance and Economics 2013, 46:437-451.
31. Meese R., Wallace N. The construction of residential housing price indices: A comparison of repeated sales, hedonic regression, and hybrid approaches. Journal of Real Estate Finance and Economics 1997, 14:51-74.
32. Miles W. The housing bubble: how much blame does the fed really deserve?. Journal of Real Estate Research 2014, 36:41-58.
33. Mishkin, F.S., 2007. Housing and the monetary transmisison mechanism, Working Paper 13518. National Bureau of Economic Research, Cambridge, MA.
34. PricewaterhouseCoopers, 2009. New Zealand monetary policy and the residential housing market - a scoping study working paper. Centre for Housing Research, Aotearoa New Zealand, Wellington.
35. Reserve Bank of New Zealand, 2007 (May). Financial stability review. Reserve Bank of New Zealand, Wellington.
36. Shiller R.J. Long-term perspective on the current boom in home prices. The Economist's Voice 2006, 3.
37. Taylor, J.B., 2007. Housing and monetary policy, NBER Working Paper No. 13682. National Bureau of Economic Research, Cambridge, MA.
38. Taylor, J.B., 2009. The financial crisis and the policy responses: An empirical analysis of what went wrong, NBER Working Paper No.14631. National Bureau of Economic Research, Cambridge, MA.
39. Tse C.B., Rodgers T., Niklewski J. The 2007 financial crisis and the UK residential housing market: did the relationship between interest rates and house prices change?. Economic Modelling 2014, 37:518-530.
40. Tripe D., McDermott J., Petro B. A test of the response to a monetary policy regime change in New Zealand. Contemporary Studies in Economics and Financial Analysis 2005, 86:453-467.
41. Vahid F., Engle R.F. Common trends and common cycles. Journal of Applied Econometrics 1993, 8(4):341-360.
42. Wheaton W.C., Nechayev G. The 1998-2005 housing "bubble" and the current "correction": what's different this time?. Journal of Real Estate Research 2008, 30:1-26.
43. Zivot E., Andrews D.W.K. Further evidence on the great crash, the oil-price shock and the unit-root hypothesis. Journal of Business and Economic Statistics 1992, 10:251-270.