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The Housing Supply Channel of Monetary Policy

Author

Listed:
  • Bruno Albuquerque

    (International Monetary Fund, Univ. of Coimbra, and CeBER)

  • Martin Iseringhausen

    (European Stability Mechanism)

  • Frederic Opitz

    (European Commission and Ghent University)

Abstract

We study the role of regional housing markets in the transmission of U.S. monetary policy. Using a FAVAR model over 1999:Q1–2019:Q4, we find that differences in housing supply constraints explain part of the regional heterogeneity in the responses of U.S. states to a contractionary monetary policy shock. Specifically, house prices and consumption respond more in supply-constrained states. Financial stability risks also increase more sharply in these areas as mortgage delinquencies and foreclosures surge, worsening banks’ balance sheets. Our findings stress the importance of regional housing supply conditions in assessing the macrofinancial effects of rising interest rates.

Suggested Citation

  • Bruno Albuquerque & Martin Iseringhausen & Frederic Opitz, 2026. "The Housing Supply Channel of Monetary Policy," International Journal of Central Banking, International Journal of Central Banking, vol. 22(2), pages 443-523, April.
    • Handle: RePEc:ijc:ijcjou:y:2026:q:2:a:7
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    File URL: https://www.ijcb.org/journal/v22n2/housing-supply-channel-monetary-policy
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    Cited by:

    1. is not listed on IDEAS
    2. Carlos Cañizares Martínez & Adriana Lojschová & Alicia Aguilar, 2026. "Non-linear effects of monetary policy shocks on housing: evidence from a CESEE country," BCL working papers 202, Central Bank of Luxembourg.
    3. Ryan Niladri Banerjee & Denis Gorea & Deniz Igan & Gabor Pinter, 2024. "Monetary policy and housing markets: insights using a novel measure of housing supply elasticity," BIS Quarterly Review, Bank for International Settlements, December.
    4. Alicia Aguilar & Adriana Lojschová & Carlos Canizares Martınez, 2025. "Non-linear effects of monetary policy shocks on housing: evidence from a CESEE country," Working and Discussion Papers WP 1/2026, Research Department, National Bank of Slovakia.
    5. Andriantomanga, Zo & Kishor, N. Kundan & Kumar, Labesh, 2025. "Interest Rate Misalignments and Monetary Policy Effects: Evidence from U.S. States," MPRA Paper 124748, University Library of Munich, Germany.
    6. Carlos Cañizares Martínez & Adriana Lojschová & Alicia Aguilar, 2026. "Non-linear effects of monetary policy shocks on housing: Evidence from a CESEE country," Working Papers 2602, Banco de España.

    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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