Abstract:
This paper develops a multi-sector DSGE model incorporating a housing market and a bank sector with financial frictions to study the transmission mechanism of monetary policy affecting the housing market and reveal the impact of policy about reducing social financing costs on financial accelerator effect in housing market. The results display the following features: first, when the social financing cost is high, monetary policy of reducing interest rate makes housing prices rise significantly; second, the government reducing social financing costs can effectively weaken financial accelerator effect in housing market; third, monetary policy pegging volatility of housing prices can improve the social welfare, but the effect of this monetary policy will be weakened due to the reduction of social financing costs.
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