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Rented vs. Owner-Occupied Housing and Monetary Policy

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  • Margarta Rubio

Abstract

The aim of this paper is to show how housing tenure (rented vs. owner-occupied) affects monetary policy. In order to do that, I propose a dynamic stochastic general equilibrium model with housing, both owned and rented. First, I analyze how, in the model, preference parameters, fiscal incentives and institutional factors determine the rental market share and the residential debt-to-GDP ratio. Then, within this framework, I study how the transmission and optimality of monetary policy differ depending on these factors. From a positive perspective, impulse responses illustrate differences in the monetary transmission mechanism. In normative terms, results show that when the relative size of the rental market is larger, monetary policy is more stabilizing. An optimal monetary policy analysis also suggests that in this case, monetary policy should respond more aggressively to inflation and disregard output, since the financial accelerator effects are weaker.

Suggested Citation

  • Margarta Rubio, 2014. "Rented vs. Owner-Occupied Housing and Monetary Policy," Discussion Papers 2014/09, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
  • Handle: RePEc:not:notcfc:14/09
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    File URL: https://www.nottingham.ac.uk/cfcm/documents/papers/cfcm-2014-09.pdf
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    References listed on IDEAS

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    1. Eva Ortega & Margarita Rubio & Carlos Thomas, 2011. "House purchase versus rental in Spain," Working Papers 1108, Banco de España;Working Papers Homepage.
    2. Margarita Rubio, 2011. "Fixed‐ and Variable‐Rate Mortgages, Business Cycles, and Monetary Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(4), pages 657-688, June.
    3. Paul van den Noord, 2005. "Tax Incentives and House Price Volatility in the Euro Area: Theory and Evidence," Economie Internationale, CEPII research center, issue 101, pages 29-45.
    4. Sami Alpanda & Sarah Zubairy, 2016. "Housing and Tax Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(2-3), pages 485-512, March.
    5. Dan Andrews & Aida Caldera Sánchez & Åsa Johansson, 2011. "Housing Markets and Structural Policies in OECD Countries," OECD Economics Department Working Papers 836, OECD Publishing.
    6. Matteo Iacoviello, 2005. "House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle," American Economic Review, American Economic Association, vol. 95(3), pages 739-764, June.
    7. Juan S. Mora-Sanguinetti, 2010. "The effect of institutions on European housing markets: An economic analysis," Estudios Económicos, Banco de España;Estudios Económicos Homepage, number 77, June.
    8. Pablo Casas-Arce & Albert Saiz, 2010. "Owning versus Renting: Do Courts Matter?," Journal of Law and Economics, University of Chicago Press, vol. 53(1), pages 137-165, February.
    9. Lucía Cuadro Sáez & Luna Romo & Margarita Rubio, 2010. "El mercado hipotecario residencial en Estados Unidos. Evolución, estructura e interrelación con la crisis," Boletín Económico, Banco de España;Boletín Económico Homepage, issue JUN, Junio.
    10. Juan S. Mora Sanguinetti, 2011. "Algunas consideraciones sobre el mercado de alquiler en España," Boletín Económico, Banco de España;Boletín Económico Homepage, issue NOV, Noviembre.
    11. Gervais, Martin, 2002. "Housing taxation and capital accumulation," Journal of Monetary Economics, Elsevier, vol. 49(7), pages 1461-1489, October.
    12. Oswald Andrew J., 1996. "A Conjecture on the Explanation for High Unemployment in the Industrialized Nations : Part I," The Warwick Economics Research Paper Series (TWERPS) 475, University of Warwick, Department of Economics.
    13. Angel, Schlomo, 2000. "Housing Policy Matters: A Global Analysis," OUP Catalogue, Oxford University Press, number 9780195137156.
    14. Jorge Martínez & M.ª de los Llanos Matea, 2002. "El mercado de la vivienda en España," Boletín Económico, Banco de España;Boletín Económico Homepage, issue SEP, Septiembr.
    15. Dan Andrews & Aida Caldera Sánchez, 2011. "Drivers of Homeownership Rates in Selected OECD Countries," OECD Economics Department Working Papers 849, OECD Publishing.
    16. José Manuel Marqués & Luis Ángel Maza & Margarita Rubio, 2010. "Una comparación de los ciclos inmobiliarios recientes en España, Estados Unidos y Reino Unido," Boletín Económico, Banco de España;Boletín Económico Homepage, issue JAN, Enero.
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    Cited by:

    1. Mariano Bosch & M. Carnero & Lídia Farré, 2015. "Rental housing discrimination and the persistence of ethnic enclaves," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 6(2), pages 129-152, June.

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    Keywords

    Housing market; rental; owner-occupied housing; monetary policy;

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