It is widely believed that, in the wake of the dot.com crash, the Fed kept the federal funds target rate too low for too long, inadvertently contributing to the subprime boom. We attribute this and other Fed departures from a “neutral” policy stance to the Fed's failure to respond...

Housing supply is subject to several types of delays. On average, it takes 6months to get approved for a residential building permit and another 2–4 quarters to complete a construction project. We present a simple two-sector model that incorporates these observations and show that the effect...