HOUSING CHANNELS OF MONETARY POLICY TRANSMISSION IN EUROPEAN INDUSTRIAL AND TRANSITION COUNTRIES
||Milcheva, Stanimira; Sebastian, Steffen
||HOUSING CHANNELS OF MONETARY POLICY TRANSMISSION IN EUROPEAN INDUSTRIAL AND TRANSITION COUNTRIES
||17th Annual European Real Estate Society Conference in Milan, Italy
||We estimate an identical vector autoregressive (VAR) model with house prices for 14 European industrial countries, 7 Central and Eastern European (CEE) countries and the US. Using counterfactual simulations of consumption and investment responses to policy rate induced house price shocks, we study the role of the housing market in the monetary policy transmission. Consistent with the literature, we find evidence of more pronounced housing channels in countries with more flexible mortgage markets. Institutional factors such as loan-to-value ratios, availability of mortgage equity withdraw, fee-free prepayment and securitization of mortgage loans strengthen the role of the housing market in the monetary policy transmission. The type of mortgage contract (variable or fixed) is not crucial. Countries exhibiting housing effects have high ratios of mortgage debt to GDP. Housing effects in European transition countries have been observed only in the Baltic countries Estonia and Lithuania where strong growth of mortgage debt during the last years has been observed. Housing effects on consumption or investment are pronounced in Denmark, Ireland, the Netherlands, Norway, Spain, Sweden and the US. In Denmark, Sweden, Spain and the US the role of the housing market for consumption has amplified since the mid 1990s.
||C32, E52, F41
||file.ppt (2,370,560 bytes)
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