The Effects of Quantitative Easing Induced Monetary Policy on the Housing Market After the Global Financial Crisis

Abstract

The Federal Reserve through monetary policy influences the economy whether it is stimulating growth or decelerating inflation. The Federal Reserve took its most prominent role during the Global Financial Crisis(GFC) that struck the United States in the late 2000’s. Caused by an inflated housing market, the economy was facing the worst recession since the Great Depression. The housing market was in a downward spiral as it made its way to Wall Street and led to large institutional failures. The Federal Reserve turned to unconventional monetary policy and used quantitative easing (QE) to stimulate the economy, lower interest rates, and revive the housing market. I utilize multiple fixed effect linear regression models to understand the impact of the large scale asset purchases (LSAP) made by the Federal Reserve on mean housing prices of the fifty largest metropolitan areas. My research and regression analysis finds mixed results for a statistical significance effect on the mean housing prices in these areas. The findings suggest that quantitative easing promoted the housing market but there is no such direct association between increasing the evaluation of the market.