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Housing Markets and Adjustment in Monetary Union


  • Peter Hoeller
  • David Rae


This paper highlights the factors that limit or increase cyclical divergence in the euro area and reviews one policy area that is important in fostering a speedy adjustment to shocks: the transmission of monetary policy via the housing market. A high interest rate sensitivity of housing markets is beneficial as monetary policy is more powerful in damping cyclical fluctuations overall in the euro area. However, housing and mortgage markets still differ widely, leading to asymmetric behaviour of individual countries. Large differences exist in home-ownership rates, financial markets, taxation and supply constraints. Moreover, it is important to have a financial system that can withstand asset price bubbles. In this context, the procyclicality of bank provisioning is of concern as it could lead to a credit crunch and reinforce a downturn. Prudential supervision across the area has become better co-ordinated, but still remains fragmented. Marchés immobiliers et ajustement en union monétaire Cet article met en évidence les facteurs qui limitent ou renforcent les divergences cycliques au sein de la zone euro et il passe en revue un des aspects importants de la politique économique permettant de promouvoir un ajustement rapide aux chocs : la transmission de la politique monétaire via le marché immobilier. Une forte sensibilité du marché du logement aux taux d'intérêt est bénéfique car la politique monétaire est plus efficace pour amortir les fluctuations cycliques de façon générale dans la zone euro. Cependant, les marchés immobiliers et hypothécaires diffèrent encore fortement, ce qui conduit à des comportements asymétriques des différents pays. Des différences importantes existent du point de vue de la proportion des propriétaires de leur logement, des marchés financiers, de la fiscalité et des contraintes affectant l'offre. De plus, il est important d'avoir un système financier qui peut résister à des bulles financières. Dans ce contexte, le comportement pro-cyclique des banques en matière de provisionnement est problématique car il pourrait conduire à une réduction de l'offre de crédit et un renforcement du ralentissement. La supervision prudentielle dans l'ensemble de la zone est devenue mieux coordonnée, mais elle reste fragmentée.

Suggested Citation

  • Peter Hoeller & David Rae, 2007. "Housing Markets and Adjustment in Monetary Union," OECD Economics Department Working Papers 550, OECD Publishing.
  • Handle: RePEc:oec:ecoaaa:550-en

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    References listed on IDEAS

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    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Christophe André, 2010. "A Bird's Eye View of OECD Housing Markets," OECD Economics Department Working Papers 746, OECD Publishing.
    2. John N. Muellbauer, 2007. "Housing, credit and consumer expenditure," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 267-334.
    3. Edward E. Leamer, 2007. "Housing is the business cycle," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 149-233.
    4. Álvarez, L-J. & Bulligan, G. & Cabrero, A. & Ferrara, L. & Stahl, H., 2009. "Housing cycles in the major euro area countries," Working papers 269, Banque de France.
    5. Axel A Weber & Rafael Gerke & Andreas Worms, 2009. "Has the monetary transmission process in the euro area changed? Evidence vased on VAR estimates," BIS Working Papers 276, Bank for International Settlements.
    6. Andrzej Toroj, 2009. "Macroeconomic adjustment and heterogeneity in the euro area," NBP Working Papers 54, Narodowy Bank Polski, Economic Research Department.
    7. Christophe André, 2016. "Household debt in OECD countries: stylised facts and policy issues," Chapters from NBP Conference Publications, Narodowy Bank Polski, Economic Research Department.
    8. Ahrend, Rudiger, 2010. "Monetary ease: A factor behind financial crises? Some evidence from OECD countries," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 4, pages 1-30.

    More about this item


    housing market; marché immobilier; monetary union; union monétaire;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L74 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Construction

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