Did monetary policy cause a housing bubble in theUS in the first half of the 2000s?
DOI:
https://doi.org/10.61173/8w85mw73Keywords:
Housing bubble, Monetary policy, Interest rates, Housing prices, Various factorsAbstract
Loose monetary policy is one of the causes of the housing bubble’s burst. The relationship between monetary policy and
the housing bubble is the main topic of this essay. Through analyzing economists’ opinions, collecting data and making
regression, and evaluating the cause of the housing bubble on my own, this essay concludes that monetary policy is
not the main cause. In this essay, I consider the relationship comprehensively. I first select and evaluate two works of
literature with different views about the relationship between the housing bubble and monetary. Then in the discussion
part, I draw on both ideas and find other arguments to draw my conclusion. This essay announces that the housing
bubble is affected by various factors, and monetary policy is just one of them.
References
the interest rate increase in the early 2000s could seriously Atif Mian and Amir Sufi (2015). House of debt: how they (and weaken the economy’s recovery from the last recession, you) caused the Great Recession, and how we can prevent and it is probably not worth the loss. From the perspective it from happening again. Chicago ; London: University Of of the solution, the fact that changing monetary policy Chicago Press.
is not the best way proves that monetary policy is not Bernanke, B. (2010). Monetary Policy and the Housing Bubble. enough to be the main cause of the housing bubble. [online] Board of Governors of the Federal Reserve System. Available at: https://www.federalreserve.gov/newsevents/speech/ Conclusion: bernanke20100103a.htm.
In conclusion, I find that loose monetary policy Brock, T. (2023). Monetary Policy . [online] Investopedia.
contributes to the housing bubble in the early 2000s, Available at: https://www.investopedia.com/terms/m/ and I regard it as one of the causes instead of the only monetarypolicy.asp.
main factor. To respond to demand and supply shocks, Investopedia (2020). Housing Bubble. [online] Investopedia. monetary policy is a powerful tool Federal Reserve can Available at: https://www.investopedia.com/terms/h/housing_ implement. There are too many factors and rules in the bubble.asp.
market for a central bank to consider making decisions, Lewis, M. (2015). The Big Short: Inside the Doomsday Machine such as expectation inflation, unemployment rate, GDP (movie tie-in). W. W. Norton & Company.
growth, etc. Making perfect plans for all needs is barely Ross, T. and McTague, T. (2017). Betting The House. Biteback impossible, so we need to accept the limitations of Publishing.
monetary policy. I learned that the Federal Reserve had Shiller, R.J. (2012). The subprime solution : how today’s global good reasons for setting low-interest rates in the early financial crisis happened, and what to do about it. Princeton, Nj 2000s and forecasted the consequences. But the crisis Etc.: Princeton University Press, , Cop.
still showed up. From the present perspective, many Sowell, T. (2010). The housing boom and bust. New York: Basic economists criticize the decisions during 2000-2005 Books.
and argue what would happen if interest rates weren’t Taylor, J. (2009). The Financial Crisis and the Policy Responses: so low. However, I think that situation would not be so An Empirical Analysis of What Went Wrong. [online] doi:https:// bad if other factors remained normal, which is not what doi.org/10.3386/w14631.
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