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Housing, consumption and monetary policy: how different are the US and the euro area?

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  • Musso, Alberto
  • Neri, Stefano
  • Stracca, Livio

Abstract

The paper provides a systematic empirical analysis of the role of the housing market in the macroeconomy in the US and in the euro area. First, it establishes some stylised facts concerning key variables in the housing market, such as the real house price, residential investment and mortgage debt on the two sides of the Atlantic. Then, it presents evidence from Structural Vector Autoregressions (SVAR) by focusing on the effects of three structural shocks, (i) monetary policy, (ii) credit supply and (iii) housing demand shocks on the housing market and the broader economy. We find that similarities overshadow di¤erences as far as the role of the housing market is concerned. We find evidence pointing in the direction of a stronger role for housing in the transmission of monetary policy shocks in the US, while the evidence is less clearcut for housing demand shocks. We also find that credit supply shocks matter more in the euro area. JEL Classification: E22, E44, E52

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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 1161.

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Date of creation: Feb 2010
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Handle: RePEc:ecb:ecbwps:20101161

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Keywords: credit; House prices; monetary policy; Residential investment;

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Cited by:
  1. Milcheva, Stanimira, 2013. "Cross-country effects of regulatory capital arbitrage," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5329-5345.
  2. Hristov, Nikolay & Hülsewig, Oliver & Wollmershäuser, Timo, 2012. "Loan supply shocks during the financial crisis: Evidence for the Euro area," Munich Reprints in Economics 19367, University of Munich, Department of Economics.
  3. Beatrice D. Simo-Kengne & Mehmet Balcilar & Rangan Gupta & Monique Reid & Goodness C. Aye, 2012. "Is The Relationship Between Monetary Policy And House Prices Asymmetric In South Africa? Evidence From A Markov-Switching Vector Autoregressive Model," Working Papers 201222, University of Pretoria, Department of Economics.
  4. Chevallier, Julien, 2012. "Global imbalances, cross-market linkages, and the financial crisis: A multivariate Markov-switching analysis," Economic Modelling, Elsevier, vol. 29(3), pages 943-973.
  5. Lambertini, Luisa & Mendicino, Caterina & Punzi, Maria Teresa, 2013. "Expectation-driven cycles in the housing market: Evidence from survey data," Journal of Financial Stability, Elsevier, vol. 9(4), pages 518-529.
  6. Milcheva, Stanimira, 2013. "A bank lending channel or a credit supply shock?," Journal of Macroeconomics, Elsevier, vol. 37(C), pages 314-332.
  7. Ambrogio Cesa-Bianchi, 2012. "Housing Cycles and Macroeconomic Fluctuations: A Global Perspective," Research Department Publications 4810, Inter-American Development Bank, Research Department.
  8. 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.
  9. Paolo Guarda & Philippe Jeanfils, 2012. "Macro-financial linkages: Evidence from country-specific VARs," BCL working papers 71, Central Bank of Luxembourg.
  10. Walentin, Karl, 2013. "Business Cycle Implications of Mortgage Spreads," Working Paper Series 275, Sveriges Riksbank (Central Bank of Sweden), revised 01 Mar 2014.
  11. Christophe Andre & Luis A. Gil-Alana & Rangan Gupta, 2013. "Comovement in Euro Area Housing Prices: A Fractional Cointegration Approach," Working Papers 201359, University of Pretoria, Department of Economics.
  12. Simo-Kengne, Beatrice D. & Balcilar, Mehmet & Gupta, Rangan & Reid, Monique & Aye, Goodness C., 2013. "Is the relationship between monetary policy and house prices asymmetric across bull and bear markets in South Africa? Evidence from a Markov-switching vector autoregressive model," Economic Modelling, Elsevier, vol. 32(C), pages 161-171.
  13. Goodness C. Aye & Rangan Gupta & Alain Kaninda & Wendy Nyakabawo & Aarifah Razak, 2013. "House Price, Stock Price and Consumption in South Africa: A Structural VAR Approach," Working Papers 201309, University of Pretoria, Department of Economics.

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