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Housing-market heterogeneity in a monetary union

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  • Rubio, Margarita

Abstract

This paper studies the implications of cross-country housing-market heterogeneity in a monetary union for both shock transmission and welfare. I develop a two-country new Keynesian general equilibrium model with housing and collateral constraints to explore this issue. The conventional wisdom is that welfare would be higher in a monetary union if mortgage markets were homogeneous. This paper shows instead that welfare is higher only when homogenization does not result in higher aggregate volatility (because of financial accelerator effects) or does not redistribute too much wealth from borrowers to savers.

Suggested Citation

  • Rubio, Margarita, 2014. "Housing-market heterogeneity in a monetary union," Journal of International Money and Finance, Elsevier, vol. 40(C), pages 163-184.
    • Handle: RePEc:eee:jimfin:v:40:y:2014:i:c:p:163-184
    DOI: 10.1016/j.jimonfin.2013.06.013
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    More about this item

    Keywords

    Housing market; Collateral constraint; Monetary policy; Monetary union;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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