The Interdependence between Monetary Policy and the Housing Market

The recent development of the Brazilian housing market has created the possibility of financial instability due to the international financial crisis, also known as the subprime crisis. In this sense, it is necessary to analyze how monetary policy may have contributed to the development of this sector, as well as to verify how the increase in housing prices may affect monetary policy decisions. Thus, this study aims to analyze the degree of interdependence between monetary policy decisions and the Brazilian housing market. To achieve this objective, we used the methodological procedures proposed by Bojrnland and Leitemo (2009), based on the SVAR methodology. The results obtained showed that a shock in interest rates does not significantly alter the level of housing prices. On the other hand, the shock in housing prices caused a negative change in the basic interest rate. The text is aimed at readers who wish to understand the effects of monetary policies on the Brazilian housing sector.