inflation and output dynamics in the United States. In particular, I find that real money balance effects are quantitatively … volatility of output and lower volatility of interest rates under the optimal monetary policy. Third, the reduction in the size … of real money balance effects can account for a significant decline in macroeconomic volatility. -- Business …

nominal policy interest rate and the CPI inflation rate decline during housing booms and rise as house prices fall. These … demonstrate that stronger policy responses to inflation amplify housing-market boom-bust cycles. Also, higher loan-to-value ratios … stability ; Inflation targets …