The Journal of Real Estate Finance and Economics

, Volume 46, Issue 3, pp 437–451

Monetary Policy and the Housing Bubble


DOI: 10.1007/s11146-011-9329-9

Cite this article as:
McDonald, J.F. & Stokes, H.H. J Real Estate Finan Econ (2013) 46: 437. doi:10.1007/s11146-011-9329-9


The causes of the housing bubble are investigated using Granger causality analysis and VAR modeling methods. The study employs the S&P/Case-Shiller aggregate 10 city monthly housing price index, available in the period 1987–2010/8, the 20 city monthly housing price index for 2000–2010/8, and the federal funds rate data for the period 1987–2010/8. The findings are consistent with the view that the interest rate policy of the Federal Reserve in the period 2001–2004 that pushed down the federal funds rate and kept it artificially low was a cause of the housing price bubble.


Housing bubbleGranger causalityImpulse response function

Copyright information

© Springer Science+Business Media, LLC 2011

Authors and Affiliations

  1. 1.Heller College of BusinessRoosevelt UniversityChicagoUSA
  2. 2.Department of EconomicsUniversity of Illinois at ChicagoChicagoUSA