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Urban growth, land scarcity, and heterogeneous monetary policy effects on regional house prices

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  • Li, Ninghui
  • Shen, Haopeng
  • Xia, Tian

Abstract

This paper investigates the heterogeneous effects of monetary policy on house prices across US metropolitan areas with different urban growth. Based on a simple two-period model, we demonstrate that the interaction of population growth and land scarcity generates cross-regional heterogeneity. When undeveloped land is scarce, population growth intensifies future land shortages, leading to larger house price responses to monetary policy shocks. We then estimate the effect of housing price response following a monetary policy shock using monthly data across 375 US metropolitan statistical areas. Consistent with the theoretical proposition, we find that house prices in high urban growth areas are more responsive to monetary policy shocks than in low urban growth areas. We also construct a novel dataset on land scarcity using a recently released land cover database, and find supporting evidence for its important role in shaping housing supply and regional heterogeneity in the transmission of monetary policy to house prices.

Suggested Citation

  • Li, Ninghui & Shen, Haopeng & Xia, Tian, 2026. "Urban growth, land scarcity, and heterogeneous monetary policy effects on regional house prices," Macroeconomic Dynamics, Cambridge University Press, vol. 30, pages 1-76, January.
    • Handle: RePEc:cup:macdyn:v:30:y:2026:i::p:e76_76
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