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The Credit Channel of Monetary Policy: Evidence from the Housing Market

  • Matteo Iacoviello

    ()

    (Boston College)

  • Raoul Minetti

    ()

    (Michigan State University)

This paper tests a credit channel of monetary policy (especially a bank-lending channel) in the housing market. We argue that the relevance of the credit channel depends on the structural features of the housing finance system, in particular efficiency and institutional organisation. We employ a structural VAR approach to analyse this issue in four European housing markets (Finland, Germany, Norway and the UK). Our results support the existence of a broad credit channel and, in some contexts, of a bank-lending channel. More importantly, the findings show across countries a clear-cut relationship between presence of a credit (bank-lending) channel, efficiency of housing finance and type of institutions active in mortgage provision.

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Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 541.

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Length: 41 pages
Date of creation: 01 Oct 2002
Date of revision: 29 Aug 2003
Handle: RePEc:boc:bocoec:541
Note: This paper was previously circulated with the title "The Credit Channel of Monetary Policy and the Housing Market: International Empirical Evidence"
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  8. Matteo Iacoviello, 2002. "House prices, borrowing constraints and monetary policy in the business cycle," Boston College Working Papers in Economics 542, Boston College Department of Economics, revised 06 Dec 2004.
  9. Maclennan, Duncan & Muellbauer, John & Stephens, Mark, 1999. "Asymmetries in Housing and Financial Market Institutions and EMU," CEPR Discussion Papers 2062, C.E.P.R. Discussion Papers.
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  19. Stein, Jeremy C, 1995. "Prices and Trading Volume in the Housing Market: A Model with Down-Payment Effects," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 379-406, May.
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  21. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1998. "Modeling Money," NBER Working Papers 6371, National Bureau of Economic Research, Inc.
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  23. Topel, Robert H & Rosen, Sherwin, 1988. "Housing Investment in the United States," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 718-40, August.
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  26. Sydney Ludvigson, 1996. "The channel of monetary transmission to demand: evidence from the market for automobile credit," Research Paper 9625, Federal Reserve Bank of New York.
  27. Ayyagari, Meghana & Beck, Thorsten & Demirguc-Kunt, Asl, 2003. "Small and medium enterprises across the globe : a new database," Policy Research Working Paper Series 3127, The World Bank.
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