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The Role of the Housing Market in Monetary Transmission

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  • Gergely Kiss

    () (Magyar Nemzeti Bank)

  • Gábor Vadas

    () (Magyar Nemzeti Bank)

Abstract

As part of the monetary transmission studies of the Magyar Nemzeti Bank, this paper attempts to analyse the role of the housing market in the monetary transmission mechanism of Hungary. The housing market can influence monetary transmission through three channels, namely, the nature of the interest burden of mortgage loans, asset (house) prices, and the credit channel. The study first summarises the experiences of developed countries, paying special attention to issues arising from the monetary union. It then examines the developments in the Hungarian housing and mortgage markets in the last 15 years, as well as the expected developments and changes attendant to the adoption of the euro. Using panel econometric techniques, the study investigates the link between macroeconomic variables and house prices in Hungary, and the effect of monetary policy on housing investment and consumption through the wealth effect and house equity withdrawal.

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File URL: http://english.mnb.hu/Root/Dokumentumtar/MNB/Kiadvanyok/mnbhu_mnbtanulmanyok/mnbhu_hattertanulmany/mnbhu_ht20053/bs2005_3.pdf
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Bibliographic Info

Paper provided by Magyar Nemzeti Bank (the central bank of Hungary) in its series MNB Background Studies (discontinued) with number 2005/3.

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Length: 38 pages
Date of creation: 2005
Date of revision:
Handle: RePEc:mnb:backgr:2005/3

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Keywords: Housing; Monetary transmission; Mortgage market; Panel econometrics.;

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References

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  1. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
  2. Whitehead, Christine M.E., 1999. "Urban housing markets: Theory and policy," Handbook of Regional and Urban Economics, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 40, pages 1559-1594 Elsevier.
  3. James M. Poterba, 1983. "Tax Subsidies to Owner-occupied Housing: An Asset Market Approach," Working papers 339, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Gábor Vadas, 2004. "Modelling Households’ Savings and Dwellings Investment – A Portfolio Choice Approach," International Real Estate Review, Asian Real Estate Society, vol. 7(1), pages 31-55.
  5. Muellbauer, J & Murphy, A, 1996. "Booms and Busts in the UK Housing Market," Economics Papers 125, Economics Group, Nuffield College, University of Oxford.
  6. Nigel Pain and Peter Westaway, 1996. "Modelling Structural Change In The UK Housing Market: A Comparison Of Alternative House Price Models," NIESR Discussion Papers 98, National Institute of Economic and Social Research.
  7. Carroll, Christopher D & Fuhrer, Jeffrey C & Wilcox, David W, 1994. "Does Consumer Sentiment Forecast Household Spending? If So, Why?," American Economic Review, American Economic Association, vol. 84(5), pages 1397-1408, December.
  8. Ignazio Angeloni & Benoit Mojon & Anil K. Kashyap & Daniele Terlizzese, 2002. "Monetary transmission in the Euro Area: where do we stand?," Working Paper Series 114, European Central Bank.
  9. Gabor Vadas, 2005. "Beyond macro variables: consumer confidence index and household expenditure in Hungary," Microeconomics 0512006, EconWPA.
  10. Paolo carnazza & Giuseppe Parigi, 2001. "The Evolution of Confidence for European Consumers and Businesses in France, Germany and Italy," Temi di discussione (Economic working papers) 406, Bank of Italy, Economic Research and International Relations Area.
  11. Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
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Cited by:
  1. Bal�zs �gert & Dubravko Mihaljek, 2007. "Determinants of House Prices in Central and Eastern Europe," Comparative Economic Studies, Palgrave Macmillan, vol. 49(3), pages 367-388, September.
  2. Olga Arratibel & Reiner Martin & Davide Furceri, 2008. "Real convergence in Central and Eastern European EU member states - which role for exchange rate volatility?," Working Paper Series 929, European Central Bank.
  3. Balázs Égert & Peter Backé & Tina Zumer, 2006. "Credit growth in Central and Eastern Europe - new (over)shooting stars?," Working Paper Series 687, European Central Bank.
  4. Fabrizio Coricelli & Balázs Égert & Ronald MacDonald, 2006. "Monetary Transmission in Central and Eastern Europe: Gliding on a Wind of Change," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 44 - 87.
  5. Balázs Vonnák, 2007. "The Hungarian Monetary Transmission Mechanism: an Assessment," MNB Working Papers 2007/3, Magyar Nemzeti Bank (the central bank of Hungary).
  6. Fabrizio Coricelli & Balázs Égert & Ronald MacDonald, 2006. "Monetary Transmission Mechanism in Central & Eastern Europe: Gliding on a Wind of Change," William Davidson Institute Working Papers Series wp850, William Davidson Institute at the University of Michigan.

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