EconPapers    
Economics at your fingertips  
 

Housing market stability, mortgage market structure, and monetary policy: Evidence from the euro area

Bing Zhu, Michael Betzinger and Steffen Sebastian

Journal of Housing Economics, 2017, vol. 37, issue C, 1-21

Abstract: This paper investigates how monetary policy stance and mortgage market structure affect non-fundamental house price movements in eleven Euro area countries. Based on a three-stage approach, our empirical evidence suggests that a one-time monetary-easing shock can significantly trigger house price booms in Euro area countries with liberal mortgage markets. Such shocks can explain over 20% of the forecasting error variance of non-fundamental house price runups in Ireland and Spain. We find that, in countries with more regulated mortgage markets, monetary policy stance does not significantly affect non-fundamental house prices. Policymakers may wish to focus on limiting mortgage equity withdrawals and on monitoring loan-to-value ratios and tax policies in order to minimize the side effects of accommodative monetary policies on housing market stability for Euro area countries. We posit that this is especially true for peripheral countries, which are more likely to be subjected to overly loose monetary policy stances.

Keywords: House prices; Taylor rate; Non-fundamental house price; Mortgage market structure (search for similar items in EconPapers)
JEL-codes: E4 R3 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1051137716300250
Full text for ScienceDirect subscribers only

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:eee:jhouse:v:37:y:2017:i:c:p:1-21

Access Statistics for this article

Journal of Housing Economics is currently edited by H. O. Pollakowski

More articles in Journal of Housing Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2018-11-07
Handle: RePEc:eee:jhouse:v:37:y:2017:i:c:p:1-21