Do expansionary and contractionary monetary policy have a symmetric impact on housing permits across the USA?

Abstract

PurposeThe purpose of this paper is to assess the possibility of asymmetric impact of monetary policy on housing permits issued in each state of the USA.Design/methodology/approachThe methodology and approach are based on the linear ARDL and nonlinear ARDL approach to error-correction modeling and asymmetric cointegration.FindingsThe linear models predict that money supply impact housing permits in 28 states in the short run and only nine states in the long run. However, the asymmetric effects are far more pervasive, highlighting the restrictive nature of the linear model. The results from the nonlinear model show at least one lag of positive and/or negative changes in money supply significantly impacts housing permits in nearly all states. Even in the long run, housing permits in 32 states share a long-run relationship with positive and/or negative changes in money supply. The authors also find contractionary monetary policy has a greater influence on housing permits in most states compared to expansionary policy.Originality/valueFor the first time, the authors use state-level data and asymmetric approach to assess the impact of monetary policy on house permits issued in each state of the USA.