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Housing, consumption and monetary policy: how different are the U.S. and the euro area?

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  • Alberto Musso

    () (European Central Bank)

  • Stefano Neri

    () (Banca d�Italia)

  • Livio Stracca

    () (European Central Bank)

Abstract

This paper provides a systematic empirical analysis of the role of the housing market in the macroeconomy in the U.S. and the euro area. First, it establishes some stylised facts concerning key variables in the housing market on the two sides of the Atlantic, such as real house prices, residential investment and mortgage debt. It then presents evidence from Structural Vector Autoregressions (SVAR) by focusing on the effects of monetary policy, credit supply and housing demand shocks on the housing market and the broader economy. The analysis shows that similarities outweigh differences as far as the housing market is concerned. The empirical evidence suggests a stronger role for housing in the transmission of monetary policy shocks in the U.S. The evidence is less clear-cut for housing demand shocks. Finally, credit supply shocks seem to matter more in the euro area.

Suggested Citation

  • Alberto Musso & Stefano Neri & Livio Stracca, 2011. "Housing, consumption and monetary policy: how different are the U.S. and the euro area?," Temi di discussione (Economic working papers) 807, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:wptemi:td_807_11
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    More about this item

    Keywords

    residential investment; house prices; credit; monetary policy;

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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