This paper studies the channels through which house prices a¤ect sectoral output in emerging market economies, focusing on the role of collateral and borrowing dynamics. We first show that relative to the tradable sector, nontradable sector output is more strongly correlated with house prices...

It is widely believed that, in the wake of the dot.com crash, the Fed kept the federal funds target rate too low for too long, inadvertently contributing to the subprime boom. We attribute this and other Fed departures from a “neutral” policy stance to the Fed's failure to respond...