Bernanke versus Taylor: a post mortem

Our analysis sheds light on the issue of whether the monetary policy contributed to the recent housing boom and bust. We have estimated and analysed a model that allows a comparison between the actual policy and several alternative Taylor rules. When the Taylor rule path was computed using revised d...

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Bibliographic Details
Published in:Applied economics 2015-09, Vol.47 (43), p.4574-4589
Main Authors: Fackler, James S., McMillin, W. Douglas
Format: Article
Language:English
Subjects:
Federal Reserve monetary policy
GDP
Gross Domestic Product
Housing
housing boom
housing bust
Housing market
Inflation
Monetary policy
Price index
Studies
Taylor rule
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Summary:Our analysis sheds light on the issue of whether the monetary policy contributed to the recent housing boom and bust. We have estimated and analysed a model that allows a comparison between the actual policy and several alternative Taylor rules. When the Taylor rule path was computed using revised data and the deflator for the GDP, we found a notable impact on key housing market variables, supporting Taylor's critique of the Fed policy. However, the bulk of our evidence suggests that the policy as it would have been conducted under our real-time Taylor rules would not have had any significant impact on the housing market variables. This conclusion is robust with regard to the price index used as well as the relative weights used on the inflation and output gaps.
ISSN:0003-6846
1466-4283
DOI:10.1080/00036846.2015.1031876