On the Transmission of Monetary Policy to the Housing Market

Abstract

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 as 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.

Publication
European Economic Review