TY  - JOUR
AU  - Jordà, Òscar
AU  - Schularick, Moritz HP.
AU  - Taylor, Alan M
TI  - Betting the House
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 20771
PY  - 2014
Y2  - December 2014
DO  - 10.3386/w20771
UR  - http://www.nber.org/papers/w20771
L1  - http://www.nber.org/papers/w20771.pdf
N1  - Author contact info:
Òscar Jordà
Economic Research, MS 1130
Federal Reserve Bank of San Francisco
San Francisco, CA 94105
E-Mail: oscar.jorda@gmail.com

Moritz Schularick
University of Bonn
Department of Economics
Adenauerallee 24-42
53113 Bonn
Germany
E-Mail: moritz.schularick@uni-bonn.de

Alan M. Taylor
Department of Economics and
Graduate School of Management
University of California
One Shields Ave
Davis, CA 95616-8578
Tel: (530) 752-0741
Fax: (530) 752-9382
E-Mail: amtaylor@ucdavis.edu
M1  - published as Òscar Jordà, Moritz Schularick, Alan M. Taylor. "Betting the House," in Richard Clarida, Jeffrey Frankel, Francesco Giavazzi, and Hélène Rey, organizers, "NBER International Seminar on Macroeconomics 2014" Journal of International Economics, 96(S1) (2015)

M3  - presented at "International Seminar on Macroeconomics", June 27-28, 2014
AB  - Is there a link between loose monetary conditions, credit growth, house price booms, and financial instability? This paper analyzes the role of interest rates and credit in driving house price booms and busts with data spanning 140 years of modern economic history in the advanced economies. We exploit the implications of the macroeconomic policy trilemma to identify exogenous variation in monetary conditions: countries with fixed exchange regimes often see fluctuations in short-term interest rates unrelated to home economic conditions. We use novel instrumental variable local projection methods to demonstrate that loose monetary conditions lead to booms in real estate lending and house prices bubbles; these, in turn, materially heighten the risk of financial crises. Both effects have become stronger in the postwar era.
ER  -