Posts filed under “Currency”

Housing and Monetary Policy

Interesting academic work on Housing Prices, Monetary Policy, and Subprime issues from Stanford’s John B. Taylor.  Incidentally, if you recognize the name Taylor — as in Taylor rule — they are one and the same  person.

Here’s the abstract:

Housing and Monetary Policy   

Since the mid-1980s, monetary policy
has contributed to a great moderation of the housing cycle by
responding more proactively to inflation and thereby reducing the boom
bust cycle. However, during the period from 2002 to 2005, the short
term interest rate path deviated significantly from what this two
decade experience would suggest is appropriate. A counter-factual
simulation with a simple model of the housing market shows that this
deviation may have been a cause of the boom and bust in housing starts
and inflation in the last two years. Moreover, a significant time
series correlation between housing price inflation and delinquency
rates suggests that the poor credit assessments on subprime mortgages
may also have been caused by this deviation.

That’s the academic overview. I found Taylor’s charts to be quite revealing:

Housing_prices_and_subprime_arm_del

Delinq_and_housing_prices

>
For those of you who want to get into the details, Taylor’s academic paper (10 pages) is rather readable for an academic work.

Sources:
Housing and Monetary Policy
John B. Taylor
Stanford University, September 2007
http://tinyurl.com/26vznb

Housing and Monetary Policy
John B. Taylor
NBER Working Paper No. 13682
December 2007
JEL No. E22,E43,E52
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1077808

John B. Taylor Home Page
Mary and Robert Raymond Professor of Economics at Stanford University
Bowen H. and Janice Arthur McCoy Senior Fellow at the Hoover Institution
http://www.stanford.edu/~johntayl/

Taylor Rules
Athanasios Orphanides
Board of Governors of the Federal Reserve System, January 2007    http://www.federalreserve.gov/Pubs/FEDS/2007/200718/200718pap.pdf

The Taylor Rule and the Transformation of Monetary Policy
Pier Francesco Asso, George A. Kahn, and Robert Leeson
Federal Reserve Bank of Kansas City, Research Division, December 2007
http://www.kansascityfed.org/Publicat/Reswkpap/RWP07-11.htm

Category: Currency, Federal Reserve, Fixed Income/Interest Rates, Real Estate

Mario Cuomo on the Economy

Category: Currency, Economy, Politics, Psychology

Quote of the Day: The Dollar

Category: Currency

Possible Improbables

Category: Commodities, Currency, Economy, Federal Reserve, Investing, M&A, Markets, Politics

NYC Bargains for Europeans

Category: Consumer Spending, Currency, Real Estate, Retail

Money Supply Growth? Its Much Worse Than That!

Category: Credit, Currency, Economy, Federal Reserve

How Sick the Dollar?

Category: Currency, Politics, Psychology, Taxes and Policy

Quote of the Day: Malpass (WTF?) on the Dollar

Category: Currency, Federal Reserve, Financial Press

Crude Oil = $98; Gold = $845

Category: Commodities, Currency, Energy, Federal Reserve, Inflation, Markets

Quote of the Day: The Xera

Category: Currency, Federal Reserve, Inflation, Psychology