The Effects of Housing Prices and Monetary Policy in a Currency Union
AbstractThe recent boom-and-bust cycle in housing prices has refreshed the debate on the drivers of housing cycles as well as the appropriate policy response. We analyze the case of Spain, where housing prices have soared since it joined the EMU. We present evidence based on a VAR model, and we calibrate a New Keynesian model of a currency area with durable goods to explain it.We find that labor market rigidities provide stronger amplification effects to all types of shocks than financial frictions do. Finally, we show that when the central bank reacts to house prices, the non-durable sector suffers an important contraction. As a result, the boom-and-bust cycle would not have been avoided if Spain had remained outside the EMU during the 1996–2007 period.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by International Journal of Central Banking in its journal International Journal of Central Banking.
Volume (Year): 7 (2011)
Issue (Month): 1 (March)
Other versions of this item:
- Pau Rabanal & Oriol Aspachs-Bracons, 2011. "The Effects of Housing Prices and Monetary Policy in a Currency Union," IMF Working Papers 11/6, International Monetary Fund.
- 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
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Oriol Aspachs-Bracons & Pau Rabanal, 2010.
"The drivers of housing cycles in Spain,"
Spanish Economic Association, vol. 1(1), pages 101-130, March.
- Darracq Pariès, Matthieu & Notarpietro, Alessandro, 2008. "Monetary policy and housing prices in an estimated DSGE for the US and the euro area," Working Paper Series 0972, European Central Bank.
- Bofinger, Peter & Debes, Sebastian & Gareis, Johannes & Mayer, Eric, 2013.
"Monetary policy transmission in a model with animal spirits and house price booms and busts,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 37(12), pages 2862-2881.
- Bofinger, Peter & Debes, Sebastian & Gareis, Johannes & Mayer, Eric, 2012. "Monetary Policy Transmission in a Model with Animal Spirits and House Price Booms and Busts," CEPR Discussion Papers 8804, C.E.P.R. Discussion Papers.
- Vittorio Peretti & Rangan Gupta & Roula Inglesi-Lotz, 2012. "Do House Prices Impact Consumption and Interest Rate in South Africa? Evidence from a Time-Varying Vector Autoregressive Model," Working Papers 201216, University of Pretoria, Department of Economics.
- Ambrogio Cesa-Bianchi, 2012.
"Housing Cycles and Macroeconomic Fluctuations: A Global Perspective,"
Research Department Publications
4810, Inter-American Development Bank, Research Department.
- Cesa-Bianchi, Ambrogio, 2013. "Housing cycles and macroeconomic fluctuations: A global perspective," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 215-238.
- John C. Williams, 2011. "Monetary Policy and Housing Booms," International Journal of Central Banking, International Journal of Central Banking, vol. 7(1), pages 345-355, March.
- Christophe André & Rangan Gupta & Patrick T. Kanda, 2012.
"Do House Prices Impact Consumption and Interest Rate?: Evidence from OECD Countries Using an Agnostic Identification Procedure,"
OECD Economics Department Working Papers
947, OECD Publishing.
- Christophe Andre & Rangan Gupta & Patrick T. Kanda, 2012. "Do House Prices Impact Consumption and Interest Rate? Evidence from OECD Countries using an Agnostic Identification Procedure," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 58(1), pages 19-70.
- Christophe Andre & Rangan Gupta & Patrick T. Kanda, 2011. "Do House Prices Impact Consumption and Interest Rate? Evidence from OECD Countries using an Agnostic Identification Procedure," Working Papers 201118, University of Pretoria, Department of Economics.
- Pau Rabanal & Oriol Aspachs-Bracons, 2009.
"The Drivers of Housing Cycles in Spain,"
IMF Working Papers
09/203, International Monetary Fund.
- Gareis, Johannes & Mayer, Eric, 2012.
"What drives Ireland's housing market? A Bayesian DSGE approach,"
W.E.P. - WÃ¼rzburg Economic Papers
88, University of Würzburg, Chair for Monetary Policy and International Economics.
- Eric Mayer & Johannes Gareis, 2013. "What Drives Ireland’s Housing Market? A Bayesian DSGE Approach," Open Economies Review, Springer, vol. 24(5), pages 919-961, November.
- Michael Funke & Michael Paetz, 2011.
"Housing Prices and the Business Cycle: An Empirical Application to Hong Kong,"
Quantitative Macroeconomics Working Papers
21112b, Hamburg University, Department of Economics.
- Funke, Michael & Paetz, Michael, 2013. "Housing prices and the business cycle: An empirical application to Hong Kong," Journal of Housing Economics, Elsevier, vol. 22(1), pages 62-76.
- Pau Rabanal & Dominic Quint, 2013.
"Monetary and Macroprudential Policy in an Estimated DSGE Model of the Euro Area,"
2013 Meeting Papers
604, Society for Economic Dynamics.
- Dominic Quint & Pau Rabanal, 2013. "Monetary and Macroprudential Policy in an Estimated DSGE Model of the Euro Area," IMF Working Papers 13/209, International Monetary Fund.
- Gareis, Johannes & Mayer, Eric, 2012. "Financial market heterogeneity: Implications for the EMU," W.E.P. - WÃ¼rzburg Economic Papers 90, University of Würzburg, Chair for Monetary Policy and International Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Timo Laurmaa).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.