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The Role Of House Prices In The Monetary Transmission Mechanism Across European Countries

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  • Massimo Giuliodori

Abstract

This paper provides a discussion of the 'housing market' channels of the monetary transmission mechanism and offers some evidence of institutional differences in the European housing and mortgage markets. Using a number of Vector Autoregressive models, estimated individually for nine European countries over the pre-EMU period, we find that house prices are significantly affected by interest rate shocks. The relative role of these interest-rate-induced fluctuations in house prices for private consumption is then investigated. We show that house prices may enhance the effects of interest rate shocks on consumer spending in those economies where housing and mortgage markets are relatively more developed and competitive. Copyright (c) Scottish Economic Society 2005.

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  • Massimo Giuliodori, 2005. "The Role Of House Prices In The Monetary Transmission Mechanism Across European Countries," Scottish Journal of Political Economy, Scottish Economic Society, vol. 52(4), pages 519-543, September.
  • Handle: RePEc:bla:scotjp:v:52:y:2005:i:4:p:519-543
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    References listed on IDEAS

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    1. Chirinko, Robert S. & Haan, Leo de & Sterken, Elmer, 2004. "Asset Price Shocks, Real Expenditures, and Financial Structure:A Multi-Country Analysis," CCSO Working Papers 200411, University of Groningen, CCSO Centre for Economic Research.
    2. Peersman, Gert & Smets, Frank, 2001. "The monetary transmission mechanism in the euro area: more evidence from VAR analysis," Working Paper Series 0091, European Central Bank.
    3. By James Morsink & Tamim Bayoumi, 2001. "A Peek Inside the Black Box: The Monetary Transmission Mechanism in Japan," IMF Staff Papers, Palgrave Macmillan, vol. 48(1), pages 1-2.
    4. Iacoviello, Matteo, 2000. "House prices and the macroeconomy in Europe: Results from a structural var analysis," Working Paper Series 0018, European Central Bank.
    5. Alexander Ludwig & Torsten M Sloek, 2002. "The Impact of Changes in Stock Prices and House Priceson Consumption in OECD Countries," IMF Working Papers 02/1, International Monetary Fund.
    6. Massimo GIULIODORI, 2002. "Monetary Policy Shocks and the Role of House Prices Across European Countries," Working Papers 164, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    7. I. Arnold & P.J.A. van Els & J. de Haan, 2002. "Wealth Effects and Monetary Policy," WO Research Memoranda (discontinued) 719, Netherlands Central Bank, Research Department.
    8. Mojon, BenoƮt, 2000. "Financial structure and the interest rate channel of ECB monetary policy," Working Paper Series 0040, European Central Bank.
    9. Frederic S. Mishkin, 2001. "The Transmission Mechanism and the Role of Asset Prices in Monetary Policy," NBER Working Papers 8617, National Bureau of Economic Research, Inc.
    10. repec:dgr:rugccs:200411 is not listed on IDEAS
    11. Benedict J. Clements & Zenon Kontolemis & Joaquim Vieira Ferreira Levy, 2001. "Monetary Policy Under EMU; Differences in the Transmission Mechanism?," IMF Working Papers 01/102, International Monetary Fund.
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