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The role of housing wealth in the transmission of monetary policy

Author

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  • Di Casola, Paola

Abstract

This box uses structural BVAR models applied to global macroeconomic data to provide evidence that monetary policy is transmitted more strongly to consumption in countries with higher shares of homeowners with mortgages, higher levels of household debt and higher shares of adjustable-rate mortgages, although the evidence for the latter is weaker. Since the previous hiking cycle, the shares of homeowners with mortgages and the levels of household debt have risen in the euro area, with countries increasingly resembling each other in this regard. This means that aggregate monetary policy transmission through the housing channel may, if anything, be stronger and more even across euro area countries in the current cycle than in past hiking cycles. JEL Classification: E21, E44, E52, R21

Suggested Citation

  • Di Casola, Paola, 2023. "The role of housing wealth in the transmission of monetary policy," Economic Bulletin Boxes, European Central Bank, vol. 5.
    • Handle: RePEc:ecb:ecbbox:2023:0005:7
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    File URL: https://www.ecb.europa.eu//pub/economic-bulletin/focus/2023/html/ecb.ebbox202305_07~5c49bb27d6.en.html
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    Citations

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    Cited by:

    1. Boysen-Hogrefe, Jens & Groll, Dominik & Hoffmann, Timo & Jannsen, Nils & Kooths, Stefan & Sonnenberg, Nils & Stamer, Vincent, 2023. "Deutsche Wirtschaft im Herbst 2023: Konjunktur windet sich aus der Stagnation [German Economy in Autumn 2023: German Economy gradually overcomes stagnation]," Kieler Konjunkturberichte 107, Kiel Institute for the World Economy (IfW Kiel).

    More about this item

    Keywords

    cash-flow channel; collateral channel; House prices; monetary policy transmission;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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