No. 1523 - Housing markets and the heterogeneous effects of monetary policy across the euro area
The ECB's monetary policy has heterogeneous effects across the various countries of the euro area. This work analyzes the reasons for such diversity by focusing on three characteristics of the housing and mortgage markets: the homeownership rate, the share of variable-rate mortgages, and the loan-to-value (LTV) ratio. Using a theoretical model, it evaluates whether imposing limits on the LTV ratio could make the transmission of monetary policy more homogeneous across different countries.
The ECB's monetary policy has a more significant impact on consumption in countries characterized by higher shares of adjustable-rate mortgages, higher homeownership rates, or higher loan-to-value ratios. Among the monetary policy transmission channels studied in the theoretical model, the mortgage credit channel proves to be the most important. Imposing limits on the loan-to-value ratio would produce very limited effects in reducing the heterogeneity of the ECB's monetary policy effects across euro area economies.
YouTube
X - Banca d'Italia
Linkedin
RSS
E-mail Alert
