The role of housing wealth in the transmission of monetary policy

Paola Di Casola

Economic Bulletin Boxes, 2023, vol. 5

Abstract: This box uses structural BVAR models applied to global macroeconomic data to provide evidence that monetary policy is transmitted more strongly to consumption in countries with higher shares of homeowners with mortgages, higher levels of household debt and higher shares of adjustable-rate mortgages, although the evidence for the latter is weaker. Since the previous hiking cycle, the shares of homeowners with mortgages and the levels of household debt have risen in the euro area, with countries increasingly resembling each other in this regard. This means that aggregate monetary policy transmission through the housing channel may, if anything, be stronger and more even across euro area countries in the current cycle than in past hiking cycles. JEL Classification: E21, E44, E52, R21

Keywords: cash-flow channel; collateral channel; House prices; monetary policy transmission (search for similar items in EconPapers)
Date: 2023-08
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