This paper estimates a Bayesian VAR for the US economy which includes a housing sector and addresses the following questions. Can developments in the housing sector be explained on the basis of developments in real and nominal GDP and interest rates? What are the effects of housing demand shocks...

This paper analyses the effect of measurement error in the output gap on efficient monetary policy rules in a simple estimated model of the US economy. While it is a well-known result that such additive uncertainty does not affect the optimal feedback rule in a linear-quadratic framework, it is...