Rented vs. owner-occupied housing and monetary policy

Margarita Rubio

No 190, NBP Working Papers from Narodowy Bank Polski

Abstract: The aim of this paper is to show how housing tenure (rented vs. owner-occupied) affects monetary policy. In order to do that, I propose a dynamic stochastic general equilibrium model with housing, both owned and rented. First, I analyze how, in the model, preference parameters, fiscal incentives and institutional factors determine the rental market share and the residential debt-to-GDP ratio. Then, within this framework, I study how the transmission and optimality of monetary policy differ depending on these factors. From a positive perspective, impulse responses illustrate differences in the monetary transmission mechanism. In normative terms, results show that when the relative size of the rental market is larger, monetary policy is more stabilizing. An optimal monetary policy analysis also suggests that in this case, monetary policy should respond more aggressively to inflation and disregard output, since the financial accelerator effects are weaker.

Keywords: Housing market; rental; owner-occupied housing; monetary policy (search for similar items in EconPapers)
JEL-codes: E21 E3 E51 E6 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Rented vs. owner-occupied housing and monetary policy (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:190

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