Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/175697 
Year of Publication: 
2017
Series/Report no.: 
ECB Working Paper No. 2073
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
We use a Bayesian stochastic search variable selection structural VAR model to investigate the heterogeneous impact of housing demand shocks on the macro-economy and the role of house prices in the monetary policy transmission, across euro area countries. A novel set of identification restrictions, which combines zero and sign restrictions, is proposed. By exploiting the cross-sectional dimension of our data, we explore the differences in the propagation channels of house prices and monetary policy and the challenges they pose in the process of real and nominal convergence in the Eurozone. Among the main results, we find a comparatively stronger housing wealth effect on consumption in Ireland and Spain. We provide new evidence in support of the financial accelerator hypothesis, showing that house prices play an important role in the availability of loans. A significant and highly heterogeneous effect of monetary policy on house price dynamics is also documented.
Subjects: 
Bayesian Vector Autoregression
house prices
identified VARs
monetary policy
policy counterfactuals
JEL: 
C22
E21
E31
E44
E52
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-2795-6
Document Type: 
Working Paper

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