US monetary policy spillovers through global commercial real estate

Dennis Bonam, Dorinth van Dijk, Gavin Goy and Bing Zhu

Working Papers from DNB

Abstract: We provide new evidence on the international spillover effects of US monetary policy through global commercial real estate (CRE) markets. Using a global VAR-X model that exploits both city- and country-level data, we account for spatial dependencies arising from cross-border investor ownership of CRE. A US quantitative easing shock leads to a persistent rise in CRE prices, both within and outside the US, and an expansion of credit, but mostly in the US. To interpret these findings, we develop an open economy New Keynesian model with CRE markets, which highlights the role of increased domestic demand for foreign CRE as a key transmission channel. Moreover, the model reveals that spillover effects can spill back to the US via trade linkages, amplifying the initial effects of US monetary policy.

Keywords: monetary policy; commercial real estate; international spillovers; quantitative easing; global VAR-X model; New Keynesian model (search for similar items in EconPapers)
JEL-codes: C32 E32 E52 F42 R33 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:872

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