One Money, Many Markets: Monetary Transmission and Housing Financing in the Euro Area

By Giancarlo Corsetti, Joao B. Duarte, Samuel Mann

June 26, 2020

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Giancarlo Corsetti, Joao B. Duarte, and Samuel Mann. One Money, Many Markets: Monetary Transmission and Housing Financing in the Euro Area, (USA: International Monetary Fund, 2020) accessed December 26, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We study the transmission of monetary shocks across euro-area countries using a dynamic factor model and high-frequency identification. We develop a methodology to assess the degree of heterogeneity, which we find to be low in financial variables and output, but significant in consumption, consumer prices, and variables related to local housing and labor markets. Building a small open economy model featuring a housing sector and calibrating it to Spain, we show that varying the share of adjustable-rate mortgages and loan-to-value ratios explains up to one-third of the cross-country heterogeneity in the responses of output and private consumption.

Subject: Consumption, Housing, Housing prices, Mortgages, Private consumption

Keywords: Coefficient of variation, Nominal exchange rate, WP

Publication Details

Pages:

63
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2020/108
Stock No:

WPIEA2020108
ISBN:

9781513548746
ISSN:

1018-5941

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