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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...
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an interest rate shock, house prices (aggregate house price and modern house price) fall sharply over the first 4 years … and do not recover to their pre-shock level. In response to a real GDP shock, both house prices react in a positive … inverted U-shaped manner. Finally, we find that an inflation shock has a U-shaped negative impact on aggregate and modern house …
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We study the transmission of monetary shocks across euro-area countries using a dynamic factor model and high-frequency identification. We develop a methodology to assess the degree of heterogeneity, which we find to be low in financial variables and output, but significant in consumption,...
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