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A Time-Varying Contribution Analysis of Monetary Policy on Fluctuations in Housing Prices

I TaLy 1,  Jinbaek Park 1

1국토연구원

Accredited

ABSTRACT

This study aims to analyze monetary policy directions and effective policy tools that could be applied under various housing market conditions and economic situations by estimating contribution rates of traditional(interest rates) and non-traditional(borrowing constraints) monetary policies with other variables using forward expanding shapley decomposition method. The first result shows that there is a negative relation between interest rates and housing prices. Thus housing prices decrease when interest rates rise. On the other hand, there is a positive relation between borrowing constraints and housing prices. Hence housing prices go up when borrowing constraints are relaxed. Another finding from contribution analysis is that the effect of changing interest rates on housing prices is the biggest in variables. The second biggest variable which influences on fluctuations in housing prices is the regulations on loans. Accordingly, a traditional monetary policy such like changes in interest rates should be used to achieve the policy goal of stabilization in housing market, while a non-traditional monetary policy like borrowing constraints should play an temporary and ancillary role to support the traditional monetary policy depending on the circumstances.

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