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

  • Alberto Musso

    ()

    (European Central Bank)

  • Stefano Neri

    ()

    (Banca d�Italia)

  • Livio Stracca

    ()

    (European Central Bank)

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.

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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 807.

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Date of creation: Apr 2011
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Handle: RePEc:bdi:wptemi:td_807_11
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