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Monetary Policy Shocks and the Role of House Prices Across European Countries

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  • Massimo GIULIODORI

    ([n.a.])

Abstract

Housing systems, as a major sector of industrialised economies, might have profound effects on the transmission mechanism of a monetary shock. Despite a progressive convergence, however, EU countries still differ significantly in their housing and credit market institutions. This paper provides a theoretical discussion of the "housing market" channels of the monetary transmission mechanism (MTM) and offers some evidence on institutional differences across EU countries. Using recursive and semi-structural VARs, we identify monetary policy shocks and assess their effects on residential prices in eight European countries over the EMS period. Results show a different degree of sensitivity of house prices, partly consistent with the institutional features of the European housing systems. We then investigate the importance of these policy-induced changes in house prices in transmitting monetary shocks to the private consumption. In some countries, results provide some support for the view that house price channel may be an important source of MTM to consumption.

Suggested Citation

  • 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.
  • Handle: RePEc:anc:wpaper:164
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    Cited by:

    1. Alessandro Calza & Tommaso Monacelli & Livio Stracca, 2013. "Housing Finance And Monetary Policy," Journal of the European Economic Association, European Economic Association, vol. 11, pages 101-122, January.
    2. Ugo Fratesi, 2003. "Innovation Diffusion and the Evolution of Regional Disparities," ERSA conference papers ersa03p327, European Regional Science Association.
    3. Nicola MATTEUCCI & Alessandro STERLACCHINI, 2003. "ICT and Employment Growth in Italian Industries," Working Papers 193, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    4. Assenmacher-Wesche, Katrin & Gerlach, Stefan, 2008. "Ensuring financial stability: Financial structure and the impact of monetary policy on asset prices," IMFS Working Paper Series 16, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    5. Katrin Assenmacher-Wesche & Stefan Gerlach, 2008. "Financial Structure and the Impact of Monetary Policy on Asset Prices," Working Papers 2008-16, Swiss National Bank.
    6. Hong Kong Monetary Authority, 2008. "The housing market channel of the monetary transmission mechanism in Hong Kong," BIS Papers chapters,in: Bank for International Settlements (ed.), Transmission mechanisms for monetary policy in emerging market economies, volume 35, pages 221-234 Bank for International Settlements.
    7. Stefania BUSSOLETTI & Roberto ESPOSTI, 2004. "Regional Convergence, Structural Funds and the Role of Agricolture in the EU. A Panel-Data Approach," Working Papers 220, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    8. Beatrice D. Simo-Kengne & Mehmet Balcilar & Rangan Gupta & Monique Reid & Goodness C. Aye, 2012. "Is The Relationship Between Monetary Policy And House Prices Asymmetric In South Africa? Evidence From A Markov-Switching Vector Autoregressive Model," Working Papers 201222, University of Pretoria, Department of Economics.
    9. McQuinn, Kieran & O' Reilly, Gerard, 2007. "A Model of Cross-Country House Prices," Research Technical Papers 5/RT/07, Central Bank of Ireland.
    10. Elbourne, Adam, 2008. "The UK housing market and the monetary policy transmission mechanism: An SVAR approach," Journal of Housing Economics, Elsevier, vol. 17(1), pages 65-87, March.
    11. Renato BALDUCCI, 2005. "Public Expenditure and Economic Growth. A critical extension of Barro's (1990) model," Working Papers 240, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    12. Calza, Alessandro & Monacelli, Tommaso & Stracca, Livio, 2006. "Mortgage markets, collateral constraints, and monetary policy: Do institutional factors matter?," CFS Working Paper Series 2007/10, Center for Financial Studies (CFS).
    13. McQuinn, Kieran, 2017. "The changing relationship between affordability and house prices: a cross-country examination," Papers WP560, Economic and Social Research Institute (ESRI).
    14. 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.
    15. O'Donnell, Nuala, 2007. "Housing Wealth and Consumption," Quarterly Bulletin Articles, Central Bank of Ireland, pages 119-136, January.
    16. Roberto ESPOSTI & Pierpaolo PIERANI, 2005. "Price, Private Demand and Optimal Provision of Public R&D in Italian Agriculture," Working Papers 238, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    17. Manfred J. M. Neumann, 2009. "Internationale Finanzkrise und die Geldpolitik der Europäischen Zentralbank," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 10(4), pages 367-388, November.
    18. Marcello MESSORI & Alberto ZAZZARO, 2004. "Monetary profits within the circuit: Ponzi finance oer "mors tua, vita mea"?," Working Papers 200, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    19. Charles Rahal,, 2016. "Housing markets and unconventional monetary policy," Journal of Housing Economics, Elsevier, vol. 32(C), pages 67-80.
    20. Elvio MATTIOLI, 2003. "The measurement of coherence in the evaluation of criteria and its effects or ranking problems illustrated using a multicriteria decision method," Working Papers 199, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.

    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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