Time-varying impacts of monetary policies on state-level housing markets: Evidence from the Covid-19 period

Abstract

This study investigates the time-varying influences of monetary policies on state-level housing markets, utilizing a time-varying parameter vector autoregression model with stochastic volatility (TVP-VAR-SV). The results suggest that time-varying state-level volatilities in housing price returns and permits growths are evident, and some of them are higher in the Covid-19 period 2020–22 than the 2007–09 housing crisis. Monetary policies exert less persistent but stronger effects on housing quantities than housing prices. The findings provide supportive evidence that the Covid-19 pandemic enhances monetary-policy influences, and aggressive contractionary monetary policies in 2022 play vital roles in driving state-level housing markets. The differences and commonalities across state-level housing markets yield new implications for policy-making and risk diversification.