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Economy

Housing and monetary policy

: Evidence of the stabilization effect in Korea derived from a DSGE Model
  • Housing and monetary policy
  • Lim, Seul-Ye; Yoo, Seung-Hoon
  • [Anyang] : Korean Association for Housing Policy Studies
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Title Housing and monetary policy
Subtitle Evidence of the stabilization effect in Korea derived from a DSGE Model
Author Lim, Seul-Ye; Yoo, Seung-Hoon
Publisher [Anyang] : Korean Association for Housing Policy Studies
Publication Date 2016 - 02
Material Type Article
Country South Korea Holding Korean Association for Housing Policy Studies
Language English License
Pages 21

Abstract

Research interest concerning macroeconomic linkages in housing has piqued since the Global Financial Crisis (GFC) of 2007-09. This paper documents evidence of such linkage in the Korean context derived from a DSGE(Dynamic Stochastic General Equilibrium) model that controls endogenous relationships between housing price and key macroeconomic variables. In particular, there are two analytical issues in our theoretical and empirical investigation: (1) the intra-temporal (or single-period) substitution between housing and non-housing consumption and (2) the stabilization effect of monetary policy from two alternative policy rules – a conventional Taylor rule that does not consider housing price vs. a modified Taylor rule that does. The results show that: (1) housing and non-housing consumption in Korea are complements, rather than substitutes, implying a positive wealth effect in that a rise in one variable causes the same direction in the other and (The rest omitted)

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