This paper studies the optimal interest rate rule in a DSGE model with housing market spillovers (Iacoviello and Neri (2010)). We find that the optimal rule responds to house price inflation even when the stabilization of house price is not among the objectives of the policymaker, and that the...

How can mortgages be redesigned to reduce housing market volatility, consumption volatility, and default? How does mortgage design interact with monetary policy? We answer these questions using a quantitative equilibrium life cycle model with aggregate shocks, long-term mortgages, and an...

Based on a behavioral stock-flow housing market model in which the expectation formation behavior of boundedly rational and heterogeneous investors may generate endogenous boom-bust cycles, we explore whether central banks can stabilize housing markets via the interest rate. Using a mix of...

How can mortgages be redesigned to reduce housing market volatility, consumption volatility, and default? How does mortgage design interact with monetary policy? We answer these questions using a quantitative equilibrium life cycle model with aggregate shocks, long-term mortgages, and an...

We introduce mortgages into a dynamic equilibrium, directed search model of the housing market. Mortgage rates play their natural role in our model by affecting the share of per-period income that a homeowner spends on mortgage payment rather than consumption. We estimate the model using...

Borrowers in states with non-recourse mortgage law face limited liability on their mortgage loans. We show that non-recourse law causes larger swings in housing prices by encouraging speculative investments when housing markets are in a boom cycle. We find that mortgage lending pricing does not...

This paper investigates heterogeneity in residential property yields using rental and sale listings from the largest German internet real estate platform. Equipped with property-level rent-to-price ratios obtained via matching properties for sale and for rent, we show that they strongly co-move...