Monday, February 27, 2012

Feroli, Harris, Sufi and West on Housing and the Transmission of Monetary Policy

I will share a link when I find one.  Let me pull out a couple of paragraphs from the executive summary:


In this report, we focus on weakness in housing. Our analysis makes two broad points. First, weakness in housing and residential investment is a main impediment to a robust recovery. Second, problems related to housing have affected the transmission of monetary policy. More specifically, the unprecedented decline in house prices and residential investment has introduced headwinds that may require a more aggressive monetary response than in normal downturns. Further, problems related to housing markets may reduce the sensitivity of real economic activity to the interest rates that monetary policy can affect. Or in the parlance of textbook intermediate macroeconomics, housing problems have likely shifted the IS curve leftwards and steepened the slope of the curve by introducing a gap between policy rates and effective rates. For both of these reasons, problems related to housing introduce significant challenges to monetary policy-making.
There are six steps in our analysis:
1. We begin by placing housing in the context of the broader economic recovery. The overall recovery in GDP has been one of the weakest in the postwar period even though the recession was the largest in the postwar period. Residential investment has been a particularly dismal performer. Further, the other weakest components of GDP--consumption of services and state and local government expenditures--can also be closely linked to weakness in housing markets. Focusing just on the direct impact of housing—home construction and housing service consumption—the sector accounts for about a third of the shortfall of growth relative to a typical recovery. Obviously the full impact of the housing crisis is bigger if we include indirect impacts on local governments and consumption of housing-related durables. We also show evidence from other countries that a collapse in housing is associated with subsequently weak recoveries....
If one looks at business cycle histories (see herehere and here), it is hard to imagine full recovery without housing market recovery.  Warren Buffet this morning said it was time for one.  I hope he is right.



8 comments:

James N. Graham said...

Hello Richard,

Glad to run across your blog.

James N. Graham
UW - Graaskamp -02

www.greenworldbvi.com said...

Just look at the latest on Case Schiller today though. Housing continues to drop and drop and drop. Investing in other hard assets like farmland investment is a much better strategy than housing will ever be.

Mississauga Condos said...

I’m really lucky and so glad that after surfing the web for a long time I have found out this information. .
http://www.condosmississauga.ca

CVGi said...

In recent times, when real estate industry is experiencing so much ups and downs, it has become a necessity for an investor to read the market trend carefully before making any investment. Just a bit of carelessness may cost a lot and hence you can not take it as for granted, or take it lightly.


Home Inspection Barrie

horselovr99 said...

Land for sale at http://www.landincorporated.com/

Gaurav Kumar said...

Residential properties vary in terms of security arrangements. However, some reputed projects have planned it in such a way, that homebuyers can now expect to live as completely safe guarded individuals on their property.

jimi said...

Our beautiful Naples provided apartments and homes are among the person corporate construction in the Metropolis country. With our lovesome and ruminative body, you module be provided relocation options to fit your requirements and be competent to superior your perfect short-term or long-term accommodations.
naples corporate housing

turesta, said...

The size of an apartment or house can be istanbul real estate described in
square feet or meters. In the United States, this includes the area of "living space", excluding the garage and
other istanbul property non-living spaces. The "square meters" figure of a
house in Europe may report the total area of istanbul properties the walls
enclosing the home, thus including any attached garage and non-living spaces, which makes it important to inquire what kind of surface
definition has been istanbul real estate used.

It can be described more roughly istanbul real estate
the number of rooms. A studio apartment has a single bedroom with istanbul real estate
no living room (possibly a separate kitchen). A one-bedroom apartment for sale in istanbul
apartment has a living or dining room separate house for sale in istanbul
from the bedroom. Two bedroom, istanbul villa three bedroom, and larger
units are common. (A bedroom is defined as a room with a closet for istanbul villa clothes storage.)

In recent years, property for sale in turkey many
economists have recognized that the lack of property for sale in istanbul
effective real estate property for sale in istanbul
laws can be a significant barrier to investment in many developing countries.
In most societies, land for sale in istanbul rich and
poor, a significant fraction of the total land for sale in turkey
wealth is in the form of land and buildings.