House Prices and the Stance of Monetary Policy

49 Pages Posted: 5 May 2008 Last revised: 6 Jul 2008

See all articles by Marek Jarocinski

Marek Jarocinski

European Central Bank (ECB)

Frank Smets

European Central Bank (ECB); KU Leuven - Center for Economic Studies

Date Written: April 2008


This paper estimates a Bayesian VAR for the US economy which includes a housing sector and addresses the following questions. Can developments in the housing sector be explained on the basis of developments in real and nominal GDP and interest rates? What are the effects of housing demand shocks on the economy? How does monetary policy affect the housing market? What are the implications of house price developments for the stance of monetary policy? Regarding the latter question, we implement a version of a Monetary Conditions Index (MCI) due to C├ęspedes et al. (2006).

Keywords: House prices, monetary conditions index, Bayesian VAR, monetary policy shock, conditional forecast.

JEL Classification: E3, E4

Suggested Citation

Jarocinski, Marek and Smets, Frank, House Prices and the Stance of Monetary Policy (April 2008). ECB Working Paper No. 891, Available at SSRN:

Marek Jarocinski (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
+49 69 1344 6414 (Phone)

Frank Smets

European Central Bank (ECB) ( email )

Kaiserstrasse 29
D-60311 Frankfurt am Main
+49 69 1344 6550 (Phone)
+49 69 1344 6575 (Fax)

KU Leuven - Center for Economic Studies ( email )

Naamsestraat 69
Leuven, B-3000

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics