scholarly journals Housing Market Stability, Mortgage Market Structure and Monetary Policy: Evidence from the Euro Area

2016 ◽  
Author(s):  
Michael Betzinger ◽  
Steffen Sebastian ◽  
Bing Zhu
Keyword(s):  
Monetary Policy ◽  
Market Structure ◽  
Housing Market ◽  
Euro Area ◽  
Mortgage Market ◽  
Market Stability

The housing market channel of monetary policy transmission in the Euro area

2016 ◽  
Vol 9 (1) ◽  
pp. 76-97
Author(s):  
Stanimira Milcheva ◽  
Steffen Sebastian
Keyword(s):  
Monetary Policy ◽  
Housing Market ◽  
Euro Area ◽  
House Prices ◽  
Monetary Policy Transmission ◽  
Mortgage Markets ◽  
Content Type ◽  
Residential Investment ◽  
Policy Transmission ◽  
Market Channel

Purpose The purpose of this paper is to explore the role of the housing market in the monetary policy transmission to consumption among euro area member states. It has been argued that the housing market in one country is then important when its mortgage market is well developed. The countries in the euro area follow unitary monetary policy; however, their housing and mortgage markets show some heterogeneity, which may lead to different policy effects on aggregate consumption through the housing market. Design/methodology/approach The housing market can act as a channel of monetary policy shocks to household consumption through changes in house prices and residential investment – the housing market channel. The authors estimate vector autoregressive models for each country and conduct a counterfactual analysis to disentangle the housing market channel and assess its importance across the euro area member states. Findings The authors find little evidence for heterogeneity of the monetary policy transmission through house prices across the euro area countries. Housing market variations in the euro area seem to be better captured by changes in residential investment rather than by changes in house prices. As a result, the authors do not find significantly large house price channels. For some of the countries however, they observe a monetary policy channel through residential investment. The existence of a housing channel may depend on institutional features of both the labour market or with institutional factors capturing the degree of household debt as is the loan-to-value ratio. Originality/value The study contributes to the existing literature by assessing whether a unitary monetary policy has a different impact on consumption across the euro area countries through their housing and mortgage markets. The authors disentangle monetary-policy-induced effects on consumption associated with variations on the housing markets due to either house price variations or residential investment changes. The authors show that the housing market can play a role in the monetary transmission mechanism even in countries with less developed mortgage markets through variations in residential investment.

scholarly journals Product Market Structure and Monetary Policy: Evidence from the Euro Area

2021 ◽  
Author(s):  
Annalisa Ferrando ◽  
Peter McAdam ◽  
Filippos Petroulakis ◽  
Xavier Vives
Keyword(s):  
Monetary Policy ◽  
Market Structure ◽  
Euro Area ◽  
Product Market
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