Bank Behaviour, Monetary Policy and the Not So Elusive Phenomenon of House Prices

This paper examines the architecture of money, role of central and commercial banks, structure and implementation of monetary policy tools (new and old), including the impact of the Basel Accords under the global consolidation of banking supervision by the Bank of International Settlements (BIS) to investigate the underlying linkages and interconnectedness of these monetary institutions with respect to the price of residential property. Process of lending to fund lending, money supply, money destruction, and the impact of credit creation on the household budget constraint and economy are discussed. A schematic accompanying this process is then introduced. Data from New Zealand is utilised as an example to complement the effects of bank behaviour, credit, and house prices as an illustration