Investigating housing supply and monetary policy under global economic turbulence

This research has contributed to literature by identifying the impacts of monetary policy and global economic turbulence on the supply side of the housing sector under a vector error correction model. The research outcomes provided policy makers with an insight to change Australia's housing shortage and declining housing affordability.

Analysing the transmission pattern within the framework of housing supply and monetary policy in Australia

Housing supply is one of important components of the housing sector. Compared with an increasingly strong housing demand, the growth rates of total housing stock in Australia have exhibited a downward trend since the end of the 1990s whilst the significant adjustments in the Australian monetary policy were being implemented. This research aims to estimate the nature of the relationship between housing supply and monetary policy by a vector error correction model. According to the empirical results, a transmission pattern comprised of the indicators associated with housing supply and monetary policy can be identified, which suggests that there is a significant interrelationship between monetary policy and the supply side of the housing sector in Australia.

An analysis of Fiji's monetary policy transmission

Purpose – The purpose of this paper is to examine the monetary policy transmission mechanism for the Fiji Islands using a structural vector autoregressive (SVAR) model for the period 1975 to 2005.

Design/methodology/approach – The SVAR model investigates how a monetary policy shock – defined as a temporary and exogenous rise in the short-term interest rate – affects real and nominal macro variables; namely real output, prices, exchange rates, and money supply.

Findings – The results suggest that a monetary policy shock statistically significantly reduces output initially, but then output is able to recover to its pre-shock level. A monetary policy shock generates inflationary pressure, leads to an appreciation of the Fijian currency and reduces the demand for money. The paper also analysed the impact of a nominal effective exchange rate (NEER) shock (an appreciation) on real output and found that it leads to a statistically significant negative effect on real output.

Practical implications – The findings of this study should be of direct relevance to the research and policy work undertaken at the Reserve Bank of Fiji.

Originality/value – For a small economy, such as Fiji, where monetary policy is key to sustainable macroeconomic management, this is the first paper that undertakes a dynamic analysis of monetary policy transmission. The paper uses time series data over three decades and builds a structural VAR model, rooted in theory. This paper will be of direct relevance to the Reserve Bank of Fiji. The approach and model proposed will also be useful for applied monetary policy researchers in other developing countries where inflation rate targeting is a key element of the monetary policy setting.

Investigating the housing market fluctuation under an expansionary monetary policy in Australia

This research empirically investigates the impact of monetary policy on the housing market in Australia from 1996 to 2009. Three primary variables associated with the housing sector and monetary policy, including interest rates, money supply and house prices, are estimated by a structural vector autoregression (VAR) model. Depending upon the analysis using the impulse response function, it can be identified that monetary policy significantly affects the housing market in Australia by the adjustments in interest rates and money supply. The empirical results from this study may be useful for policy makers to enact appropriate policies in relation to the infrastructure planning.

Some benefits of cyclical monetary policy

In this paper, we present a simple random-matching model of seasons, where di§erent seasons translate into di§erent propensities to consume and produce. We Önd that the cyclical creation and destruction of money is beneÖcial for welfare under a wide variety of circumstances. Our model of seasons can be interpreted as providing support for the creation of the Federal Reserve System, with its mandate of supplying an elastic currency for the nation.

The contagion effect of public debt on monetary policy: the brazilian experience

This paper attempts to explain why the Brazilian inter-bank interest rate is so high compared with rates practiced by other emerging economies. The interplay between the markets for bank reserves and government securities feeds into the inter-bank rate the risk premium of the Brazilian public debt.

Monetary policy and country risk

This article develops an econometric model in order to study country risk behavior for six emerging economies (Argentina, Mexico, Russia, Thailand, Korea and Indonesia), by expanding the Country Beta Risk Model of Harvey and Zhou (1993), Erb et. al. (1996a, 1996b) and Gangemi et. al. (2000). Toward this end, we have analyzed the impact of macroeconomic variables, especially monetary policy, upon country risk, by way of a time varying parameter approach. The results indicate an inefficient and unstable effect of monetary policy upon country risk in periods of crisis. However, this effect is stable in other periods, and the Favero-Giavazzi effect is not verified for all economies, with an opposite effect being observed in many cases.

Stochastic growth and monetary policy: the impacts on the term structure of interest rates

This paper builds a simple, empirically-verifiable rational expectations model for term structure of nominal interest rates analysis. It solves an stochastic growth model with investment costs and sticky inflation, susceptible to the intervention of the monetary authority following a policy rule. The model predicts several patterns of the term structure which are in accordance to observed empirical facts: (i) pro-cyclical pattern of the level of nominal interest rates; (ii) countercyclical pattern of the term spread; (iii) pro-cyclical pattern of the curvature of the yield curve; (iv) lower predictability of the slope of the middle of the term structure; and (v) negative correlation of changes in real rates and expected inflation at short horizons.