Journal
JOURNAL OF THE EUROPEAN ECONOMIC ASSOCIATION
Volume 11, Issue -, Pages 101-122Publisher
OXFORD UNIV PRESS
DOI: 10.1111/j.1542-4774.2012.01095.x
Keywords
E21; E52; E44
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We document three facts concerning how the structure of housing finance affects the monetary transmission mechanism: first, the characteristics of residential mortgage markets differ markedly across industrialized countries; second, the impact of monetary policy shocks to residential investment and house prices is significantly stronger in those countries with larger flexibility/development of mortgage markets; third, the transmission to consumption is stronger only in those countries where mortgage equity release is common and mortgage contracts are predominantly of the variable-rate type. We then build a two-sector DSGE model with financial constraints to rationalize those facts.
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