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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.

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File URL: http://dx.doi.org/10.1787/208627725571
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Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 550.

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Date of creation: 17 Apr 2007
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Handle: RePEc:oec:ecoaaa:550-en
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