Gauging the effects of expanded subprime lending on house prices is complicated by two-way causality – more lending can drive up house prices but expected house price increases can also induce more lending. Undoubtedly, causality did  7  For example, the International Monetary Fund (2008) found evidence that house prices have become more sensitive to monetary policy in countries with more mortgage deregulation.
8  Del Negro and Otrok (2007) find little influence on the national component of house price appreciation from 2001 to 2005. In contrast, Iacoviello and Neri (2008) contend that monetary policy accounted for more than a quarter of the run-up. However, both of these papers only look at the effects of the non-systematic component of monetary policy.