Housing, Consumption and Monetary Policy: How Different are the US and the Euro Area?

47 Pages Posted: 17 Jan 2012

See all articles by Alberto Musso

Alberto Musso

European Central Bank (ECB)

Stefano Neri

Bank of Italy

Livio Stracca

European Central Bank (ECB)

Date Written: February 2, 2010

Abstract

The paper provides a systematic empirical analysis of the role of the housing market in the macroeconomy in the US and in the euro area. First, it establishes some stylised facts concerning key variables in the housing market, such as the real house price, residential investment and mortgage debt on the two sides of the Atlantic. Then, it presents evidence from Structural Vector Autoregressions (SVAR) by focusing on the effects of three structural shocks, (i) monetary policy, (ii) credit supply and (iii) housing demand shocks on the housing market and the broader economy. We find that similarities overshadow differences as far as the role of the housing market is concerned. We find evidence pointing in the direction of a stronger role for housing in the transmission of monetary policy shocks in the US, while the evidence is less clearcut for housing demand shocks. We also find that credit supply shocks matter more in the euro area.

Keywords: Residential investment, House prices, Credit, Monetary Policy

JEL Classification: E22, E44, E52

Suggested Citation

Musso, Alberto and Neri, Stefano and Stracca, Livio, Housing, Consumption and Monetary Policy: How Different are the US and the Euro Area? (February 2, 2010). ECB Working Paper No. 1161, Available at SSRN: https://ssrn.com/abstract=1551880 or http://dx.doi.org/10.2139/ssrn.1551880

Alberto Musso

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Stefano Neri

Bank of Italy ( email )

Via Nazionale 91
00184 Roma
Italy
+39 06 4792 2821 (Phone)

HOME PAGE: http://sites.google.com/view/stefano-neri/home

Livio Stracca (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
0049 69 13440 (Phone)
0044 69 1344 6000 (Fax)

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