Monetary Policy and Housing Booms
by John C. Williams
Federal Reserve Bank of San Francisco
A multitude of factors contributed to the housing booms
and crashes experienced in many countries and the ensuing
global financial crisis. Much of the existing research on these
issues assumes that agents have complete information about
the economic environment and form rational expectations.
This commentary argues that models with imperfect knowledge
and learning provide a potentially rich avenue of research
on issues related to housing bubbles and monetary policy. Such
models open up an avenue for the endogenous emergence of
bubble-like behavior and also provide channels by which monetary
and supervisory policies can influence the development
JEL Codes: D44, E52, E83.
(PDF, 11 pages 431 kb)