Monetary policy and housing bubble

Abstract

This research paper examines the relationship between monetary policy and housing prices in macroeconomics, with a focus on the United States. Housing prices play a substantial role in the consumer price index, and therefore, ensuring price stability for goods and services. The paper reviews the literature on two different perspectives: John Taylor's argument that loose monetary policy contributed to a surge in house prices, and Ben Bernanke's perspective that other factors caused the housing bubble. This paper contains the discussion on the literature of monetary policy and house prices, using the linear regression model and the idea of Taylor rule from different perspectives to identify the relationship between monetary policy and the housing prices. The analysis reveals differences in purposes of the models, which provides a basis for further discussion on the rule of monetary policy.