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Rented vs. owner-occupied housing and monetary policy

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  • Rubio Margarita

    (University of Nottingham, Department of Economics, University Park,Nottingham NG7 2RD, United Kingdom of Great Britain and Northern Ireland)

Abstract

The aim of this paper is to show how housing tenure (rented vs.cowner-occupied) affects monetary policy. I propose a dynamic stochastic general equilibrium model with housing, both owned and rented. First, I analyze how, in the model, preference parameters, fiscal incentives, and institutional factors determine the rental market share and the residential debt-to-GDP ratio. Then, within this framework, I study how the transmission and optimality of monetary policy differ depending on these factors. From a positive perspective, impulse responses illustrate differences in the monetary transmission mechanism. I find that of all factors, tax incentives generate the largest differences. In normative terms, results show that when the relative size of the rental market is larger, monetary policy is more stabilizing. An optimal monetary policy analysis also suggests that in this case, monetary policy should respond more aggressively to inflation and disregard output, because the financial accelerator effects are weaker.

Suggested Citation

  • Rubio Margarita, 2019. "Rented vs. owner-occupied housing and monetary policy," The B.E. Journal of Macroeconomics, De Gruyter, vol. 19(1), pages 1-16, January.
  • Handle: RePEc:bpj:bejmac:v:19:y:2019:i:1:p:16:n:1
    DOI: 10.1515/bejm-2016-0110
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    References listed on IDEAS

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    8. Mora-Sanguinetti, Juan S. & Rubio, Margarita, 2014. "Recent reforms in Spanish housing markets: An evaluation using a DSGE model," Economic Modelling, Elsevier, vol. 44(S1), pages 42-49.
    9. Jeske, Karsten & Liu, Zheng, 2013. "Should The Central Bank Be Concerned About Housing Prices?," Macroeconomic Dynamics, Cambridge University Press, vol. 17(1), pages 29-53, January.
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    Cited by:

    1. Stähler, Nikolai, 2019. "Who benefits from using property taxes to finance a labor tax wedge reduction?," Journal of Housing Economics, Elsevier, vol. 46(C).
    2. Mariano Bosch & M. Carnero & Lídia Farré, 2015. "Rental housing discrimination and the persistence of ethnic enclaves," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 6(2), pages 129-152, June.

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    More about this item

    Keywords

    housing market; monetary policy; owner-occupied housing; rental;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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