The House Price Channel of Quantitative Easing

Hannah Magdalena Seidl

No 2141, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: I study the transmission mechanism of Quantitative Easing (QE) in the form of large-scale asset purchases in the mortgage market to aggregate consumption. To this end, I develop a New Keynesian model that features heterogeneous households, a microfounded housing market, and frictional intermediation. This model helps explain the empirical evidence suggesting that QE increases aggregate consumption by raising house prices. I find that higher house prices account for around half of QE’s stimulative effects, with higher labor income contributing the remaining half.

Keywords: Quantitative easing; heterogeneous agents; incomplete markets; sticky wages; housing; asset prices (search for similar items in EconPapers)
JEL-codes: E12 E21 E44 E52 (search for similar items in EconPapers)
Pages: 36 p.
Date: 2025
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mon
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