On the transmission of monetary policy to the housing market

March 17, 2021
Issue 2021-06

Summary

We provide empirical evidence on the heterogeneous transmission of monetary policy to the housing market across and within countries. We use household-level data from Germany, Italy and Switzerland together with the respective monetary policy shocks identified from high-frequency data. We find that the pass-through of monetary policy shocks to rates of newly originated (fixed-rate) mortgages is twice as strong in Switzerland than in Germany and Italy. After an accommodative monetary policy shock, this is associated in the housing market with a larger immediate, and persistent increase of transitions from renting to owning; a stronger decrease in rents; and an increase of the price-rent ratio. Within Italy, we find a stronger pass-through to mortgage rates, housing tenure transitions and the price-rent ratio in the northern regions that have been characterized in the literature as more financially developed than the southern regions.

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Issue:
06
Pages:
73
JEL classification:
E21, E52, R21
Keywords:
Monetary policy transmission, housing market, home ownership, rents, house prices
Year:
2021

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Author(s)

  • Winfried Koeniger

  • Benedikt Lennartz

  • Dr. Marc-Antoine Ramelet

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