Can interest rates really control house prices? Effectiveness and implications for macroprudential policy

Shi, S; Jou, JB; Tripe, D

Can interest rates really control house prices? Effectiveness and implications for macroprudential policy

Shi, S

Jou, JB Tripe, D

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Publication Type:: Journal Article
Citation:: Journal of Banking and Finance, 2014, 47 (1), pp. 15 - 28
Issue Date:: 2014-01-01

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Field	Value	Language
dc.contributor.author	Shi, S https://orcid.org/0000-0003-4188-5151	en_US
dc.contributor.author	Jou, JB	en_US
dc.contributor.author	Tripe, D	en_US
dc.date.issued	2014-01-01	en_US
dc.identifier.citation	Journal of Banking and Finance, 2014, 47 (1), pp. 15 - 28	en_US
dc.identifier.issn	0378-4266	en_US
dc.identifier.uri	http://hdl.handle.net/10453/116684
dc.description.abstract	This paper investigates how changes in the central bank policy and retail mortgage rates affected real housing prices in New Zealand during the period 1999-2009. We find that real interest rates are significantly and positively related to real housing prices, indicating that increases in the policy rate may not be effective in depressing real housing prices. By testing interest rates, we also find some evidence of housing price bubbles. Our findings suggest that the central bank could have limited housing price bubbles if it had started to intervene in the housing market prior to 2003. Our results set international exemplars for using policy rates or macroprudential tools to cool the housing market, where the extent of policy rate adjustments is limited by internal or external economic factors. © 2014 Elsevier B.V.	en_US
dc.relation.ispartof	Journal of Banking and Finance	en_US
dc.relation.isbasedon	10.1016/j.jbankfin.2014.06.012	en_US
dc.subject.classification	Finance	en_US
dc.title	Can interest rates really control house prices? Effectiveness and implications for macroprudential policy	en_US
dc.type	Journal Article
utslib.citation.volume	1	en_US
utslib.citation.volume	47	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
utslib.for	0102 Applied Mathematics	en_US
utslib.for	1401 Economic Theory	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Design, Architecture and Building
pubs.organisational-group	/University of Technology Sydney/Faculty of Design, Architecture and Building/School of Built Environment
utslib.copyright.status	closed_access
pubs.issue	1	en_US
pubs.publication-status	Published	en_US
pubs.volume	47	en_US

Abstract:

This paper investigates how changes in the central bank policy and retail mortgage rates affected real housing prices in New Zealand during the period 1999-2009. We find that real interest rates are significantly and positively related to real housing prices, indicating that increases in the policy rate may not be effective in depressing real housing prices. By testing interest rates, we also find some evidence of housing price bubbles. Our findings suggest that the central bank could have limited housing price bubbles if it had started to intervene in the housing market prior to 2003. Our results set international exemplars for using policy rates or macroprudential tools to cool the housing market, where the extent of policy rate adjustments is limited by internal or external economic factors. © 2014 Elsevier B.V.

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http://hdl.handle.net/10453/116684