I’ll begin with a quick look at some stylized facts about the evolution of house prices. Then, I’ll examine their long-run determinants from both the demand and supply sides. Finally, I’ll comment on the implications of house prices for financial stability and the recent experience with macroprudential housing-related policies, including their complementary interaction with monetary policy.
Our economies have begun to return to normal after the trauma of the global financial crisis. But the process of interest rate normalization has been much more gradual than traditional models with embedded Taylor rules would advocate. Taking a gradual, data-dependent approach to policy is an obvious form of risk management in the face of augmented uncertainty.