HOUSING FINANCE AND MONETARY POLICY. (3rd January 2013)

• Record Type: Journal Article
• Authors: Calza, Alessandro; Monacelli, Tommaso; Stracca, Livio
• Is Part Of: Journal of the European Economic Association. Volume 11(2013)Supplement 1
• Page Start: 101
• Page End: 122
• Publication Date: 2013-01-03
• Subjects: E21 -- E44 -- E52; Economics -- Periodicals; Économie politique -- Périodiques; Science économique; Périodique électronique (Descripteur de forme); Ressource Internet (Descripteur de forme); 330
• DOI: 10.1111/j.1542-4774.2012.01095.x
• Languages: English
• ISSNs: 1542-4766

Abstract

Abstract: We document three facts concerning how the structure of housing finance affects the monetary transmission mechanism: first, the characteristics of residential mortgage markets differ markedly across industrialized countries; second, the impact of monetary policy shocks to residential investment and house prices is significantly stronger in those countries with larger flexibility/development of mortgage markets; third, the transmission to consumption is stronger only in those countries where mortgage equity release is common and mortgage contracts are predominantly of the variable‐rate type. We then build a two‐sector DSGE model with financial constraints to rationalize those facts.