Monetary Policy Shocks and Australian Housing Markets
Bayesian SVAR estimation of monetary policy transmission to housing prices and construction in Australia.
Abstract. This project uses a Bayesian Structural Vector Autoregression (SVAR) to estimate the effects of domestic and foreign monetary policy shocks on Australian housing prices and new housing construction. Identification relies on exclusion restrictions, estimated via the Gibbs sampler following Waggoner and Zha (2003). I build three model extensions incorporating Normal-Gamma priors, Normal-Inverse Gamma priors, and common stochastic volatility. A positive domestic monetary policy shock reduces both new housing approvals and housing prices, while a positive foreign (US) monetary policy shock reduces new construction but raises prices — revealing asymmetric transmission across the two shock types.
Keywords: Bayesian SVAR · impulse responses · monetary policy · housing prices · stochastic volatility
Data: Quarterly Australian data from the Reserve Bank of Australia and the Australian Bureau of Statistics, 2003 Q3–2021 Q4.
Tools: R (bsvars package), Quarto.