Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153406
Authors: 
Darracq Pariès, Matthieu
Notarpietro, Alessandro
Year of Publication: 
2008
Series/Report no.: 
ECB Working Paper 972
Abstract: 
We estimate a two-country Dynamic Stochastic General Equilibrium model for the US and the euro area including relevant housing market features and examine the monetary policy implications of housing-related disturbances. In particular, we derive the optimal monetary policy cooperation consistent with the structural specification of the model. Our estimation results reinforce the existing evidence on the role of housing and mortgage markets for the US and provide new evidence on the importance of the collateral channel in the euro area. Moreover, we document the various implications of credit frictions for the propagation of macroeconomic disturbances and the conduct of monetary policy. We find that allowing for some degree of monetary policy response to fluctuations in the price of residential goods improves the empirical fit of the model and is consistent with the main features of optimal monetary policy response to housing-related shocks.
Subjects: 
Bayesian estimation
credit frictions
housing
new open economy macroeconomics
optimal monetary policy
JEL: 
E4
E5
F4
Document Type: 
Working Paper

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