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Source link: http://archive.mises.org/7772/review-mirror-economics-for-sale/

Review Mirror Economics For Sale

February 13, 2008 by

Here is the latest NBER working paper from the venerated John “Taylor Rule” Taylor. Notice too that you actually have to pay a fee to download the paper!! Austrians saw the housing bubble coming as early as 2002.

“Housing and Monetary Policy” Fee Download

NBER Working Paper No. W13682

JOHN B. TAYLOR, Stanford University
Email: John.Taylor@stanford.edu

Since the mid-1980s, monetary policy has contributed to a great moderation of the housing cycle by responding more proactively to inflation and thereby reducing the boom bust cycle. However, during the period from 2002 to 2005, the short term interest rate path deviated significantly from what this two decade experience would suggest is appropriate. A counterfactual simulation with a simple model of the housing market shows that this deviation may have been a cause of the boom and bust in housing starts and inflation in the last two years. Moreover, a significant time series correlation between housing price inflation and delinquency rates suggests that the poor credit assessments on subprime mortgages may also have been caused by this deviation.

{ 1 comment }

kids wall mirrors March 6, 2010 at 6:35 pm

Hey so glad you did this. Found you randomly on Bing

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