Monetary policy and housing prices

Anne Kerttula and Anne Mikkola

No 15/1988, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: In this paper we study the determination of housing prices. We are particularly interested in how monetary policy affects housing prices. First we derived the explanatory variables for housing prices from the utility maximisation framework. In this setting housing prices are determined by income, wealth, the user cost of housing, the demographic factor, and the supply of housing. In addition, our survey of the theoretical literature indicates that monetary policy affects housing prices through the user cost as well as through the liquidity of the households and through the changes in the valuation of alternative assets. In the empirical part of the paper we ran regressions on data from the Helsinki area. Quarterly data from years 1973 -87 was used. Interest rate was found to be a significant explanatory variable in determining housing priees. Also net migration into Helsinki area and taxable wealth turned out to be of equal importance.

Date: 1988
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:rdp1988_015

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