@article{Housing-Market:1538,
      recid = {1538},
      author = {Tomura, Hajime},
      title = {Optimal Monetary Policy during Endogenous Housing-Market  Boom-Bust Cycles},
      address = {2009},
      pages = {1 online resource (iii, 39 pages)},
      abstract = {This paper uses a small-open economy model for the  Canadian economy to examine the optimal Taylor-type  monetary policy rule that stabilizes output and inflation  in an environment where endogenous boom-bust cycles in  house prices can occur. The model shows that boom-bust  cycles in house prices emerge when credit-constrained  mortgage borrowers expect that future house prices will  rise and this expectation is neither shared by savers nor  realized ex-post. These boom-bust cycles replicate the  stylized features of housing-market boom-bust cycles in  industrialized countries. In an environment where mortgage  borrowers are occasionally over-optimistic, the central  bank should be less responsive to inflation, more  responsive to output, and slower to adjust the nominal  policy interest rate. This optimal monetary policy rule  dampens endogenous boom-bust cycles in house prices, but  prolongs inflation target horizons due to weak policy  reactions to inflation fluctuations after fundamental  shocks.},
      url = {http://www.oar-rao.bank-banque-canada.ca/record/1538},
      doi = {https://doi.org/10.34989/swp-2009-32},
}