The effects of unanticipated monetary
policy on real house prices (2023)
Abstract: A measure of
high-frequency monetary policy shocks is an important tool for
identifying the effects of policy surprises on real house prices. This
paper documents that high-frequency changes in market rates around FOMC
announcements can be explained multi-dimensional way; Surprise changes
in the federal funds rate, forward guidance, and large-scale asset
purchases. Real house prices respond strongly to the surprises to
longer-term future rates as compared to the surprise changes in the
federal funds rate. These findings are established using panel data in
the United States between 1991 and 2018 across divisions. The
responsiveness of house prices to monetary policy shocks depends on the
nature of the shock - expansionary versus contractionary. The paper
documents that contractionary monetary policy shocks have a considerably
greater and more persistent impact on real house prices.
The role of macro-policies in
regional real house price dynamics (2023)
Abstract: This paper utilizes a
multi-level dynamic factor model estimated on quarterly state-level data
from 1976 to 2022 using Bayesian methods to estimate the relative
importance of the national component in real house price movements
compared to local shocks. The paper provides evidence that regional
components account for an average of 48% of the variation in real house
price dynamics from 1976 to the late 1990s, indicating a significant
role played by regional and state-specific (local) factors during this
period. However, in contrast, a national factor contributes to a
substantial portion of real house price fluctuations in recent periods,
with an average of 87% for 2007-2011 and 85% for 2020-2022.
Does the Federal Reserve respond to house
prices? Implications for monetary policy (2023)
Abstract: This paper revisits Romer and Romer’s (2004) narrative identification approach to monetary policy shocks by allowing a monetary authority to respond systematically to corporate credit spreads and real house price dynamics. The paper documents the systematic response of interest rates to these variables and shows that accounting for this systematic response solves an observed empirical puzzle in the literature, where unanticipated increases in the interest rate, instead of contracting the economy, acted as expansionary shocks during the Great Moderation period. Specifically, it investigates the Federal Open Market Committee (FOMC) transcripts using natural language processing tools, to document the increased importance of house prices in discussions among FOMC members about the implementation of monetary policy.
Necessity of managing non-core
liabilities: Evidence from commercial banks in South Korea
Abstract: The paper constructs panel
data using the balance sheets of 15 domestic banks and studies the
relevance of non-core liabilities relative to the bank assets on the
default risk. The banks resort to non-core liabilities to meet the
excess credit demand when there is faster credit growth than deposits.
However, the relative size of the non-core liabilities can increase
banks’ risk exposure. Hence, once a contractionary shock hits the
economy, especially the financial markets, refinancing to maturity would
be limited, leading to serious liquidity risk and a credit crunch.
According to the panel analysis, this paper provides empirical evidence
that the default risk increases as banks use non- core liabilities for
their primary financing purposes.