Housing-market heterogeneity in a monetary union

Margarita Rubio

Journal of International Money and Finance, 2014, vol. 40, issue C, 163-184

Abstract: This paper studies the implications of cross-country housing-market heterogeneity in a monetary union for both shock transmission and welfare. I develop a two-country new Keynesian general equilibrium model with housing and collateral constraints to explore this issue. The conventional wisdom is that welfare would be higher in a monetary union if mortgage markets were homogeneous. This paper shows instead that welfare is higher only when homogenization does not result in higher aggregate volatility (because of financial accelerator effects) or does not redistribute too much wealth from borrowers to savers.

Keywords: Housing market; Collateral constraint; Monetary policy; Monetary union (search for similar items in EconPapers)
JEL-codes: E32 E44 F36 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (32)

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Working Paper: Housing market heterogeneity in a monetary union (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:40:y:2014:i:c:p:163-184

DOI: 10.1016/j.jimonfin.2013.06.013

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