nr 015 - Monetary Policy Shocks and the Role of House Prices Across European Countries
- DNB Working Papers
-
Date 24 November 2004
This paper provides a discussion of the ‘housing market’ channels
of the monetary transmission mechanism (MTM) and offers some
evidence on institutional differences in the European housing and
mortgage markets. Using a number of VAR models, estimated
individually for nine European countries over the pre-EMU period,
we find that house prices are significantly affected by monetary
policy shocks. The relative role of these policy-induced
fluctuations in house prices for private consumption is then
investigated. We show that house prices may enhance the effects of
monetary shocks on consumer spending in those economies where
housing and mortgage markets are relatively more developed and
competitive. Keywords: Monetary transmission, house prices, impulse
responses. JEL Codes: C32, E21, E52, R21.