What Role Did The Setting Of Monetary Policy Play On Housing Market Developments?

1743 WordsJun 30, 20157 Pages
What role did the setting of monetary policy play in housing market developments? Monetary policies play can or not play a major role in the housing developments. This all depends on the supporting evidences provided that aligns with the goals of the policy makers. In this scenario monetary policy was not the initial reason for the extraordinary strength in the housing markets. According this case study, a relationship between interest rates and housing activities is not adequate enough to explain the rise in residential investments or house prices. However some increase in housing markets can attest to lower interest rates and favourable monetary policies that followed after the 2011 recession, which was actually a small factor, As…show more content…
Similar to the United States and as noted by Taylor (2008) and Ahrend and others (2008), In light of these considerations, the evaluation of policy settings is perhaps best done through a comparison of projected outcomes for the policy objectives given policy expectations; such a comparison involves examining whether the forecasts of policymakers, the private sector, or other forecasters were consistent with a balancing of the price stability objective and the full employment objective (for example, the unemployment rate in the neighborhood of its estimated natural rate). This guidance was designed to influence asset prices, economic activity, and inflation in a manner consistent with the goals of price stability and full employment. As has been emphasized by many researchers, the guidance of expectations is the primary channel through which policy affects economic outcomes—the overnight interest rate in the interbank market is in itself in consequential for economic activity, except to the extent that it affects expectations of the future path of this rate, which in turn influence a broad array of asset prices important to aggregate spending and price setting. The central role of communication regarding the future path of the policy
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