Infrequent Housing Adjustment, Limited Participation, and Monetary Policy

Material TypeArticleLanguageEnglish
TitleInfrequent Housing Adjustment, Limited Participation, and Monetary Policy Author(S)ANDRA GHENT (Author)
Abstract  This paper asks why monetary contractions have strong effects on the housing market. The paper presents a model with staggered housing adjustment in which monetary policy has real effects in the absence of any rigidity in producer pricing or wages. Limited participation in financial markets leads to a rise in the real mortgage rate following an increase in the nominal short rate. Since households must take on a mortgage to consume housing, the rise in the real interest rate reduces the share of residential investment in output ...Paginationp931–955
SubjectEconomicsDescriptorsEconomics
Journal TitleJournal of Money, Credit, and Banking  
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