scholarly journals International Real Estate Review

2017 ◽  
Vol 20 (1) ◽  
pp. 23-49
Author(s):  
Zan Yang ◽  
◽  
Shuping Wu ◽  
Yanhao Shen ◽  
◽  
...  
Keyword(s):  
Monetary Policy ◽  
House Prices ◽  
Simulation Method ◽  
Household Consumption ◽  
Housing Wealth ◽  
Monetary Policy Transmission ◽  
Policy Changes ◽  
Tier 1 ◽  
Policy Transmission ◽  
Panel Vector Autoregression

This paper studies the relationships among monetary policy, house prices, and consumption in China from both national and regional perspectives. Using a panel vector autoregression (VAR) model and a counterfactual simulation method, we find that monetary policy has a significant effect on consumption but with a regional pattern, in terms of the magnitude and the housing wealth channel. It is found that in the middle southern and the western cities, the monetary policy has strong effects on consumption while the house prices have minimal contribution to the monetary policy transmission to household consumption. By contrast, in the Tier-1 and the eastern cities, house prices play a more important role in monetary policy transmission; even household consumption is less sensitive to monetary policy changes.

The housing market channel of monetary policy transmission in the Euro area

2016 ◽  
Vol 9 (1) ◽  
pp. 76-97
Author(s):  
Stanimira Milcheva ◽  
Steffen Sebastian
Keyword(s):  
Monetary Policy ◽  
Housing Market ◽  
Euro Area ◽  
House Prices ◽  
Monetary Policy Transmission ◽  
Mortgage Markets ◽  
Content Type ◽  
Residential Investment ◽  
Policy Transmission ◽  
Market Channel

Purpose The purpose of this paper is to explore the role of the housing market in the monetary policy transmission to consumption among euro area member states. It has been argued that the housing market in one country is then important when its mortgage market is well developed. The countries in the euro area follow unitary monetary policy; however, their housing and mortgage markets show some heterogeneity, which may lead to different policy effects on aggregate consumption through the housing market. Design/methodology/approach The housing market can act as a channel of monetary policy shocks to household consumption through changes in house prices and residential investment – the housing market channel. The authors estimate vector autoregressive models for each country and conduct a counterfactual analysis to disentangle the housing market channel and assess its importance across the euro area member states. Findings The authors find little evidence for heterogeneity of the monetary policy transmission through house prices across the euro area countries. Housing market variations in the euro area seem to be better captured by changes in residential investment rather than by changes in house prices. As a result, the authors do not find significantly large house price channels. For some of the countries however, they observe a monetary policy channel through residential investment. The existence of a housing channel may depend on institutional features of both the labour market or with institutional factors capturing the degree of household debt as is the loan-to-value ratio. Originality/value The study contributes to the existing literature by assessing whether a unitary monetary policy has a different impact on consumption across the euro area countries through their housing and mortgage markets. The authors disentangle monetary-policy-induced effects on consumption associated with variations on the housing markets due to either house price variations or residential investment changes. The authors show that the housing market can play a role in the monetary transmission mechanism even in countries with less developed mortgage markets through variations in residential investment.

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