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 House Prices and Monetary Policy: A Cross-Cou
 Contributor: Alan Ahearne 
 Published by: MG553 Interdisciplinary Project
January 22, 2008

This paper examines periods of pronounced rises and falls of real house prices since 1970 in eighteen major industrial countries, with particular focus on the lessons for monetary policy. We find that real house prices are pro-cyclical—co-moving withreal GDP, consumption, investment, CPI inflation, budget and current account balances, and output gaps. House price booms are typically preceded by a period of easing monetary policy, but then diminishing slack and rising inflation lead monetary aut horities to begin tightening policy before house prices peak.

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