Housing Market and the Transmission of Monetary Policy: Evidence from U.S. States

Maria Christidou () and Panagiotis Konstantinou ()
Additional contact information
Maria Christidou: Department of Economics, University of Macedonia
Panagiotis Konstantinou: Department of Economics, University of Macedonia

Discussion Paper Series from Department of Economics, University of Macedonia

Abstract: What are the effects of monetary policy on the housing market? Is the response of the housing market similar across different states? We explore the impact of monetary policy shocks on real house prices and housing investment, using US state-level data. To this end we estimate VAR models for the period 1988-2009, to assess the differential effect - if any - of a common monetary policy shock on house prices and investment. Our VAR models also allow us to explore the macroeconomic effect of wealth shocks that originate in the housing market (housing prices). Our empirical models include key macroeconomic variables, namely personal income, prices and the federal funds rate, as well as housing market variables, e.g. real house prices, given by the FHFA house price index, and housing investment, proxied by the number of housing starts. Our baseline estimates suggest that transmission of monetary policy is heterogeneous across US states. Moreover, our VAR models indicate the presence of a wealth effect across most US states, as a positive housing price innovation leads to a strong, negative response of personal income.

Keywords: House prices; Monetary policy transmission; VAR; Wealth effect. (search for similar items in EconPapers)
JEL-codes: C32 E21 E52 R31 (search for similar items in EconPapers)
Date: 2011-09, Revised 2011-09
New Economics Papers: this item is included in nep-cba, nep-mon and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://aphrodite.uom.gr/econwp/pdf/dp142011.pdf
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to aphrodite.uom.gr:80 (A connection attempt failed because the connected party did not properly respond after a period of time, or established connection failed because connected host has failed to respond.)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mcd:mcddps:2011_14

Access Statistics for this paper

More papers in Discussion Paper Series from Department of Economics, University of Macedonia
Bibliographic data for series maintained by Theodore Panagiotidis () and Anastasia Litina ().