Brito, PauloMarini, GiancarloPiergallin, Alessandro2024-03-272024-03-272016Brito, Paulo; Giancarlo Marin and Alessandro Piergallini .(2016). “House prices and monetary policy”, MPRA - Working Paper No. 89577. 2016 .(Search PDF in 2024).http://hdl.handle.net/10400.5/30490This paper analyzes global dynamics in an overlapping generations general equilibrium model with housing-wealth effects. It demonstrates that monetary policy cannot burst rational bubbles in the housing market. Under monetary policy rules of the Taylor-type, there exist global self-fulfilling paths of house prices along a heteroclinic orbit connecting multiple equilibria. From bifurcation analysis, the orbit features a boom (bust) in house prices when monetary policy is more (less) active. The paper also proves that booms or busts cannot be ruled out by interest-rate feedback rules responding to both inflation and house pricesengHouse PricesHousing-Wealth EffectsMonetary Policy RulesEquilibrium DynamicsGlobal DeterminacyHeteroclinic Orbitsworking paper