Monetary policy can cause big swings in house prices and lead to long-lasting economic ups and downs. By adding 'animal spirits' to a standard model, researchers found that optimism and pessimism triggered by monetary policy affect house prices, which then impact the overall economy. Comparing this to a model without 'animal spirits', they discovered that a regular rule for setting monetary policy isn't great at keeping the economy stable. Instead, a rule that considers house prices works better.