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One Money, Many Markets: Monetary Transmission and Housing Financing in the Euro Area

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  • Giancarlo Corsetti
  • Joao B. Duarte
  • Samuel Mann

Abstract

We study the transmission of monetary shocks across euro-area countries using a dynamic factor model and high-frequency identification. We develop a methodology to assess the degree of heterogeneity, which we find to be low in financial variables and output, but significant in consumption, consumer prices, and variables related to local housing and labor markets. Building a small open economy model featuring a housing sector and calibrating it to Spain, we show that varying the share of adjustable-rate mortgages and loan-to-value ratios explains up to one-third of the cross-country heterogeneity in the responses of output and private consumption.

Suggested Citation

  • Giancarlo Corsetti & Joao B. Duarte & Samuel Mann, 2020. "One Money, Many Markets: Monetary Transmission and Housing Financing in the Euro Area," IMF Working Papers 2020/108, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2020/108
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    More about this item

    Keywords

    WP; coefficient of variation; nominal exchange rate;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • 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
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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