Monetary Policy and Racial Inequality in Housing Markets: A Study of 140 US Metropolitan Areas

Qi Li and Xu Zhang

Staff Working Papers from Bank of Canada

Abstract: This paper investigates the differential impact of monetary policy on homeownership and housing returns among Black, Hispanic and White households. Using data on 13 million repeat sales from 1993 to 2020, we construct and analyze race-specific entries and exits of homeownership and housing returns for 140 metropolitan areas in the United States. Our findings reveal significant heterogeneity: for minority households, one unit of monetary tightening leads to a 15% lower housing return and a 31% lower entry into homeownership than White households. This heterogeneity primarily stems from the less favorable labor market responses of minority groups to contractionary monetary policy. These findings emphasize the unintended consequences of monetary policy on racial inequality in the housing market.

Keywords: Monetary policy; Housing; Central bank research (search for similar items in EconPapers)
JEL-codes: E40 E52 R00 (search for similar items in EconPapers)
Pages: 79 pages
Date: 2023-12
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mon and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:23-62

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