Thanks for this series, particularly this final chapter. What's ironic is that the U.S. seems to have achieved the state of unity in the housing market that Leamer and others were incorrectly using to describe the U.S. in the early 2000's. Our equilibrium is permanently low supply, bad filtering, high rents, and reduced migration rates. I'm exaggerating a bit, but the demographic impacts of housing costs since the Great Recession are a matter of fact---which is now being described incorrectly by a new generation of economists and pundits.
Leamer #4 In response to .... what? It seems unlikely that either housing construction or price changes would always respond the same to central bank policy dealing with positive or negative demand or supply shocks.
Leamer #3 Every meeting of the FOMC, every speech by a Board member ought to be an "intervention" to achieve the targeted outcome. Events can make some interventions points more consequential than others.
Leamer #2. Plausible but more true in practice than in theory. Past settings of policy instruments should not per se influence current settings. [Of course the effects of past settings are data that go into current setting.] There should be no "forward guidance" about instrument settings. Forward guidance about targeting, what is intended from each decision about instrument settings IS desirable but a central bank decision about instrument settings should be like prices in an efficient market, contain no information about future settings.
I think he does have an interesting point here. He says, (1) residential investment is an important marginal category in economic activity going into and out of recessions, and (2) it has high serial correlation. So, there's this weird category of economic activity that is very important for avoiding recessions, but it doesn't change on a dime, so the Fed has to approach it with some foresight.
That’s perfectly reasonable. “Important marginal category” in response to changes in monetary policy instruments. The upshot here is for fiscal policy to be more responsive to monetary policy changes so that its effects are spready more evenly throughout the economy rather than so much through housing. The problem is that fiscal policy can be serially correlated, too, besides being slow to respond. Housing is not the only 800 lb. gorilla.
Leamer #1 Only half right (and not the right half :)) Housing is the sector _most affected by_ monetary policy. There is no "business cycle" and therefore housing does not predict it, does not cause it. Economic fluctuations result from the interaction of non-monetary events and central bank actions.
Thanks for this series, particularly this final chapter. What's ironic is that the U.S. seems to have achieved the state of unity in the housing market that Leamer and others were incorrectly using to describe the U.S. in the early 2000's. Our equilibrium is permanently low supply, bad filtering, high rents, and reduced migration rates. I'm exaggerating a bit, but the demographic impacts of housing costs since the Great Recession are a matter of fact---which is now being described incorrectly by a new generation of economists and pundits.
Leamer #4 In response to .... what? It seems unlikely that either housing construction or price changes would always respond the same to central bank policy dealing with positive or negative demand or supply shocks.
Leamer #3 Every meeting of the FOMC, every speech by a Board member ought to be an "intervention" to achieve the targeted outcome. Events can make some interventions points more consequential than others.
Leamer #2. Plausible but more true in practice than in theory. Past settings of policy instruments should not per se influence current settings. [Of course the effects of past settings are data that go into current setting.] There should be no "forward guidance" about instrument settings. Forward guidance about targeting, what is intended from each decision about instrument settings IS desirable but a central bank decision about instrument settings should be like prices in an efficient market, contain no information about future settings.
I think he does have an interesting point here. He says, (1) residential investment is an important marginal category in economic activity going into and out of recessions, and (2) it has high serial correlation. So, there's this weird category of economic activity that is very important for avoiding recessions, but it doesn't change on a dime, so the Fed has to approach it with some foresight.
That’s perfectly reasonable. “Important marginal category” in response to changes in monetary policy instruments. The upshot here is for fiscal policy to be more responsive to monetary policy changes so that its effects are spready more evenly throughout the economy rather than so much through housing. The problem is that fiscal policy can be serially correlated, too, besides being slow to respond. Housing is not the only 800 lb. gorilla.
Leamer #1 Only half right (and not the right half :)) Housing is the sector _most affected by_ monetary policy. There is no "business cycle" and therefore housing does not predict it, does not cause it. Economic fluctuations result from the interaction of non-monetary events and central bank actions.