Real Estate and Monetary Policy: The Varying Response of Housing Markets and Commercial Property Markets to Expansionary Monetary Policy Shocks
Date
2016
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Producer
Director
Performer
Choreographer
Costume Designer
Music
Videographer
Lighting Designer
Set Designer
Crew Member
Funder
Rehearsal Director
Concert Coordinator
Advisor
Moderator
Panelist
Alternative Title
Department
Haverford College. Department of Economics
Type
Thesis
Original Format
Running Time
File Format
Place of Publication
Date Span
Copyright Date
Award
Language
eng
Note
Table of Contents
Terms of Use
Rights Holder
Access Restrictions
Dark Archive
Terms of Use
Tripod URL
Identifier
Abstract
The motivations of this research paper stem from the economic and social implications of the global financial crisis of 2008 and 2009. The subprime lending crisis in the United States, and the way in which the Federal Reserve responded to a deteriorating housing market frame the way in which the real estate market function today. Throughout the rest of this research paper, I attempt to discern the impact of expansionary monetary policy announcements on the real estate markets in the years following the financial crisis. I also explain the way in which Federal Reserve announcements were manifested in the commercial and residential property market respectively, and some of the underlying rationale why the responses differed. The analytical models used in my approach have been used in prior research by Gabriel & Lutz (2014), and Wright (2011). I use a factor-augmented vector auto-regression in order to ascertain price responses in commercial and residential markets to Fed announcements on a daily frequency. The results of my research are somewhat inconclusive as in all of the generated impulse response functions, the confidence intervals include zero thereby rendering these results statistically insignificant. I believe that part of this result is attributable to the complexity of the financial securities as some of the time series variables are not directly indicative of underlying property prices. The lack of comparability across variables in both the commercial and residential data sets make it difficult to infer the strength of the response to Fed announcements in each respective market. However as I discuss in the results sections, the individual IFS frame a larger trend which is that the property markets on aggregate respond favorable to expansionary policy announcements. The shortcomings of this research paper on a higher level, stem primarily from the fact that there are no daily price indices that monitor asset values in the United States. Thus while one can use derivatives and more complex securities to infer price responses, it is difficult to make definitive conclusions void of a daily price series.