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Book part
Publication date: 26 April 2014

Michael D. Bordo and John Landon-Lane

In this paper we investigate the relationship between loose monetary policy, low inflation, and easy bank credit and house price booms.

Abstract

Purpose

In this paper we investigate the relationship between loose monetary policy, low inflation, and easy bank credit and house price booms.

Method

Using a panel of 11 OECD countries from 1920 to 2011 we estimate a panel VAR in order to identify loose monetary policy shocks, low inflation shocks, bank credit shocks, and house price shocks.

Findings

We show that during boom periods there is a heightened impact of all three “policy” shocks with the bank credit shock playing an important role. However, when we look at individual house price boom episodes the cause of the price boom is not so clear. The evidence suggests that the house price boom that occurred in the United States during the 1990s and 2000s was not due to easy bank credit.

Research limitations/implications

Shocks from the shadow banking system are not separately identified. These are incorporated into the fourth “catch-all” shock.

Practical implications

Our evidence on housing price booms that expansionary monetary policy is a significant trigger buttresses the case for central banks following stable monetary policies based on well understood and credible rules.

Originality/value of paper

This paper uses historical evidence to evaluate the relative importance of three main causes of house price booms. Our results bring into question the commonly held view that loose bank credit was to blame for the U.S. house price bubble of the later 1990s.

Details

Macroeconomic Analysis and International Finance
Type: Book
ISBN: 978-1-78350-756-6

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Article
Publication date: 1 February 1997

James R. Lothian

Banking and finance during the past several decades have become “re‐internationalized,” not simply “internationalized.” This becomes clear when we compare the…

Abstract

Banking and finance during the past several decades have become “re‐internationalized,” not simply “internationalized.” This becomes clear when we compare the institutional features of banking and finance today with those in the early part of this century, the last period in which both had a substantial international dimension. It is further apparent in historical data that are analyzed in the paper: cross‐country spreads between real interest rates over the long period 1835 to 1990, and figures for gross foreign assets available for a number of major countries at key points in time from 1885 to 1994. The paper concludes by discussing the factors responsible for the changes that have occurred in banking and finance during the past several decades.

Details

Managerial Finance, vol. 23 no. 2
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 1 January 1982

MICHAEL D. BORDO and EHSAN U. CHOUDHRI

How do prices in a small open economy such as Canada adjust to external disturbances in the short‐run? What role does domestic monetary policy play in the adjustment process?

Abstract

How do prices in a small open economy such as Canada adjust to external disturbances in the short‐run? What role does domestic monetary policy play in the adjustment process?

Details

Studies in Economics and Finance, vol. 6 no. 1
Type: Research Article
ISSN: 1086-7376

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Article
Publication date: 1 January 1983

FERNANDO SANTOS

The existence of a stable relation between the demand for real cash balances and some few variables relating it to real economic activity is one of the cornerstones of the…

Abstract

The existence of a stable relation between the demand for real cash balances and some few variables relating it to real economic activity is one of the cornerstones of the monetarist approach. Such a relation permits us not only to analyze the impact of monetary change on economic activity but, since it is stable, it also has important predictive content. A better insight is then possible on the analysis of the effects of monetary policy. On this basis, it has been shown that money really matters and that the money supply is, with regard to economic stability, a powerful but also a dangerous weapon when heedlessly used by governments.

Details

Studies in Economics and Finance, vol. 7 no. 1
Type: Research Article
ISSN: 1086-7376

Abstract

Details

A Research Annual
Type: Book
ISBN: 978-1-84950-045-6

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Article
Publication date: 1 January 1982

MICHAEL HOLLIHAN

The literature concerning the subject of inflation and relative prices has been growing so fast in the last few years that a review in chronological order allows for a…

Abstract

The literature concerning the subject of inflation and relative prices has been growing so fast in the last few years that a review in chronological order allows for a greater understanding of the subject. This approach is taken here.

Details

Studies in Economics and Finance, vol. 6 no. 1
Type: Research Article
ISSN: 1086-7376

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Book part
Publication date: 31 December 2003

Abstract

Details

A Research Annual
Type: Book
ISBN: 978-1-84950-574-1

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Book part
Publication date: 26 April 2014

Abstract

Details

Macroeconomic Analysis and International Finance
Type: Book
ISBN: 978-1-78350-756-6

Abstract

Details

Macroeconomic Analysis and International Finance
Type: Book
ISBN: 978-1-78350-756-6

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Article
Publication date: 1 January 1984

MICHAEL DAVID BORDO and EHSAN U. CHOUDHRI

How well does the “Law of One Price” operate across countries? Interest in this question has been stimulated by the Monetary Aproach to the Balance of Payments (Frenkel…

Abstract

How well does the “Law of One Price” operate across countries? Interest in this question has been stimulated by the Monetary Aproach to the Balance of Payments (Frenkel and Johnson (1975)) which uses the law to determine the price of traded goods in open economies.

Details

Studies in Economics and Finance, vol. 8 no. 1
Type: Research Article
ISSN: 1086-7376

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