We analytically characterize optimal monetary policy for a New Keynesian model with a housing sector. If one supposes … that the private sector has rational expectations about future housing prices and inflation, optimal monetary policy can be … characterized without making reference to housing price developments: commitment to a "target criterion" that refers only to …

We analytically characterize optimal monetary policy for an augmented New Keynesian model with a housing sector. With … rational private sector expectations about housing prices and inflation, optimal monetary policy can be characterized by a … standard "target criterion" in terms of inflation and the output gap, that makes no reference to housing prices. If instead the …