Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/331748 
Year of Publication: 
2025
Series/Report no.: 
DIW Discussion Papers No. 2141
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
I study the transmission mechanism of Quantitative Easing (QE) in the form of large-scale asset purchases in the mortgage market to aggregate consumption. To this end, I develop a New Keynesian model that features heterogeneous households, a microfounded housing market, and frictional intermediation. This model helps explain the empirical evidence suggesting that QE increases aggregate consumption by raising house prices. I find that higher house prices account for around half of QE's stimulative effects, with higher labor income contributing the remaining half.
Subjects: 
Quantitative Easing
Heterogeneous Agents
Incomplete Markets
Sticky Wages
Housing
Asset Prices
JEL: 
E12
E21
E44
E52
Document Type: 
Working Paper

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