Francisco Abstract: We present evidence of heterogeneous price and quantity responses to monetary policy shocks along the housing ladder. We connect this finding to filtering; the process by which high-tier housing, over time, becomes low-tier housing. Finally, we embed filtering in an otherwise standard macro-housing model.
Yinjie Abstract: I study how central bank balance sheet policies influence the credit spread of sovereign debt. In my model, multiple debt price equilibria arise due to investors’ self-fulfilling beliefs about the future government debt path. Quantitative easing (QE), by increasing the supply of reserves, which are more senior liabilities, in exchange for long-term debt, dilutes existing bondholders and can trigger a shift to a default equilibrium if implemented as a one-time unexpected policy. In contrast, a credible commitment to expand the balance sheet in response to rising debt can anchor expectations and eliminate the default equilibrium by moderating the perceived future debt trajectory.