Hostname: page-component-cd9895bd7-lnqnp Total loading time: 0 Render date: 2024-12-27T11:28:32.503Z Has data issue: false hasContentIssue false
  • English
  • Français

INTERNATIONAL HOUSING MARKETS, UNCONVENTIONAL MONETARY POLICY, AND THE ZERO LOWER BOUND

Published online by Cambridge University Press:  14 November 2018

Florian Huber  and
Maria Teresa Punzi
Florian Huber
Affiliation:
Salzburg Centre of European Union Studies (SCEUS), University of Salzburg
Maria Teresa Punzi*
Affiliation:
Webster Vienna Private University
*
Address correspondence to: Maria Teresa Punzi, Webster Vienna Private University. Palais Wenkheim, Praterstrasse 23 - 1020, Vienna, Austria. e-mail: maria-teresa.punzi@webster.ac.at; punzimt@gmail.com.
Get access Rights & Permissions [Opens in a new window]

Abstract

In this paper, we analyze the relationship between unconventional monetary policy (UMP), measured through shadow interest rates, and housing markets for the USA, the United Kingdom, Japan, and the Euro Area using a set of time-varying parameter vector autoregressive models. Our findings suggest that the monetary policy transmission mechanism to the housing market has not changed with the implementation of quantitative easing or forward guidance for most economies considered. A counterfactual exercise provides some evidence that UMP has been particularly successful in dampening the consequences of the financial crisis on housing markets in the USA, while the effects are more muted in the remaining countries considered.

Keywords

Zero Lower BoundShadow Interest RateHousing MarketTime-Varying Parameter VAR
Type
Articles
Information
Macroeconomic Dynamics , Volume 24 , Issue 4 , June 2020 , pp. 774 - 806
Copyright
© Cambridge University Press 2018

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

The work on this paper is part of FinMaP (Financial Distortions and Macroeconomic Performance, contract no. SSH.2013.1.3-2), funded by the European Union under its Seventh Framework Programme for Research and Technological Development. We would like to thank Hans Genberg, Philipp Piribauer, and two anonymous referees for helpful comments and suggestions.

References

Arias, Jonas E., Rubio-Ramírez, Juan F. and Waggoner, Daniel F. (2018) Inference based on structural vector autoregressions identified with sign and zero restrictions: Theory and applications. Econometrica 86(2), 685–720.CrossRefGoogle Scholar
Baumeister, C. and Benati, L. (2013) Unconventional monetary policy and the great recession: Estimating the macroeconomic effects of a spread compression at the zero lower bound. International Journal of Central Banking 9(2), 165–212.Google Scholar
Bernanke, B. S., Boivin, J. and Eliasz, P. (2005) Measuring the effects of monetary policy: A factor-augmented vector autoregressive (FAVAR) approach. The Quarterly Journal of Economics 120(1), 387–422.Google Scholar
Bernanke, B. S. and Gertler, M. (1995) Inside the black box: The credit channel of monetary policy transmission. Journal of Economic Perspectives 9(4), 27–48.CrossRefGoogle Scholar
Bernanke, B. S., Gertler, M. and Gilchrist, S. (1999) The financial accelerator in a quantitative business cycle framework. Handbook of Macroeconomics 1, 1341–1393.CrossRefGoogle Scholar
Black, F. (1995) Interest rates as options. The Journal of Finance 50(5), 1371–1376.CrossRefGoogle Scholar
Caldara, D. and Herbst, E. (2018) Monetary policy, real activity, and credit spreads: Evidence from Bayesian proxy SVARs. American Economic Journal: Macroeconomics (forthcoming).Google Scholar
Calza, A., Monacelli, T. and Stracca, L. (2013) Housing finance and monetary policy. Journal of the European Economic Association 11(suppl 1), 101–122.CrossRefGoogle Scholar
Canova, F. and De Nicolo, G. (2002) Monetary disturbances matter for business fluctuations in the G-7. Journal of Monetary Economics 49(6), 1131–1159.CrossRefGoogle Scholar
Carroll, C. and Dunn, W. (1997) Unemployment expectations, jumping (S, s) triggers, and household balance sheets. In: NBER Macroeconomics Annual 1997, Volume 12, pp. 165–230. Cambridge: MIT Press.Google Scholar
Chen, H., Cúrdia, V. and Ferrero, A. (2012) The macroeconomic effects of large-scale asset purchase programmes. The Economic Journal 122(564), F289–F315.CrossRefGoogle Scholar
Chung, H., Laforte, J.-P., Reifschneider, D. and Williams, J. C. (2012) Have we underestimated the likelihood and severity of zero lower bound events? Journal of Money, Credit and Banking 44(s1), 47–82.CrossRefGoogle Scholar
Cogley, T. and Sargent, T. J. (2005) Drifts and volatilities: Monetary policies and outcomes in the post WWII US. Review of Economic Dynamics 8(2), 262–302.CrossRefGoogle Scholar
Del Negro, M., Eggertsson, G. B., Ferrero, A. and Kiyotaki, N. (2011) The great escape? A quantitative evaluation of the Fed’s liquidity facilities. A Quantitative Evaluation of the Fed’s Liquidity Facilities. FRB of New York Staff Report (520).CrossRefGoogle Scholar
Den Haan, W. J. and Sterk, V. (2011) The myth of financial innovation and the great moderation. The Economic Journal 121(553), 707–739.CrossRefGoogle Scholar
Eickmeier, S. and Ng, T. (2015) How do US credit supply shocks propagate internationally? A GVAR approach. European Economic Review 74, 128–145.CrossRefGoogle Scholar
Erceg, C. and Levin, A. (2006) Optimal monetary policy with durable consumption goods. Journal of Monetary Economics 53(7), 1341–1359.CrossRefGoogle Scholar
Gambacorta, L., Hofmann, B. and Peersman, G. (2014) The effectiveness of unconventional monetary policy at the zero lower bound: A cross-country analysis. Journal of Money, Credit and Banking 46(4), 615–642.CrossRefGoogle Scholar
Gambetti, L. and Musso, A. (2017) Loan supply shocks and the business cycle. Journal of Applied Econometrics 32(4), 764–782.CrossRefGoogle Scholar
Garriga, C., Kydland, F. E. and Sustek, R. (2017) Mortgages and monetary policy. The Review of Financial Studies 30(10), hhx043.CrossRefGoogle Scholar
Gilchrist, S. and Zakrajšek, E. (2012) Credit spreads and business cycle fluctuations. The American Economic Review 102(4), 1692–1720.CrossRefGoogle Scholar
Goodhart, C. and Hofmann, B. (2008) House prices, money, credit, and the macroeconomy. Oxford Review of Economic Policy 24(1), 180–205.CrossRefGoogle Scholar
Guerrieri, L. and Iacoviello, M. (2014) Collateral Constraints and Macroeconomic Asymmetries. Working Paper.CrossRefGoogle Scholar
Huber, F. (2016) Density forecasting using Bayesian global vector autoregressions with stochastic volatility. International Journal of Forecasting 32(3), 818–837.CrossRefGoogle Scholar
Iacoviello, M. (2005) House prices, borrowing constraints, and monetary policy in the business cycle. American Economic Review 95(3), 739–764.CrossRefGoogle Scholar
Jarociński, M. and Smets, F. R. (2008) House prices and the stance of monetary policy. Federal Reserve Bank of St. Louis Review 90(4), 339–365.Google Scholar
Kapetanios, G., Mumtaz, H., Stevens, I. and Theodoridis, K. (2012) Assessing the economy-wide effects of quantitative easing. The Economic Journal 122(564), F316–F347.CrossRefGoogle Scholar
Kastner, G. (2014) Dealing with stochastic volatility in time series using the R package stochvol. Journal of Statistical Software 69(5), 1–30.Google Scholar
Kastner, G. and Frühwirth-Schnatter, S. (2014) Ancillarity-sufficiency interweaving strategy (ASIS) for boosting MCMC estimation of stochastic volatility models. Computational Statistics and Data Analysis 76, 408–423.CrossRefGoogle Scholar
Kiyotaki, N. and Moore, J. (1997) Credit chains. Journal of Political Economy 105(21), 211–248.CrossRefGoogle Scholar
Koop, G., Leon-Gonzalez, R. and Strachan, R. W. (2009) On the evolution of the monetary policy transmission mechanism. Journal of Economic Dynamics and Control 33(4), 997–1017.CrossRefGoogle Scholar
Korobilis, D. (2013) Assessing the transmission of monetary policy using time-varying parameter dynamic factor models. Oxford Bulletin of Economics and Statistics 75(2), 157–179.CrossRefGoogle Scholar
Krippner, L. (2012) Modifying Gaussian Term Structure Models When Interest Rates Are Near the Zero Lower Bound. Reserve Bank of New Zealand Discussion Paper (2012/02).CrossRefGoogle Scholar
Krippner, L. (2013a) Measuring the stance of monetary policy in zero lower bound environments. Economics Letters 118(1), 135–138.CrossRefGoogle Scholar
Krippner, L. (2013b) A Tractable Framework for Zero-Lower-Bound Gaussian Term Structure Models. Reserve Bank of New Zealand Discussion Paper Series DP2013/02. Reserve Bank of New Zealand.CrossRefGoogle Scholar
Lambertini, L., Mendicino, C. and Punzi, M. T. (2013) Expectation-driven cycles in the housing market: Evidence from survey data. Journal of Financial Stability 9(4), 518–529.CrossRefGoogle Scholar
Lenza, M., Pill, H. and Reichlin, L. (2010) Monetary policy in exceptional times. Economic Policy 25(62), 295–339.CrossRefGoogle Scholar
Lombardi, M. J. and Zhu, F. (2014) A Shadow Policy Rate to Calibrate US Monetary Policy at the Zero Lower Bound. Discussion Paper, Bank for International Settlements.Google Scholar
Matsuyama, K. (1990) Residential investment and the current account. Journal of International Economics 28(1), 137–153.CrossRefGoogle Scholar
McCarthy, J. and Peach, R. W. (2002) Monetary policy transmission to residential investment. Federal Reserve Bank of New York Economic Policy Review 8(1), 139–158.Google Scholar
Meaning, J. and Zhu, F. (2011) The impact of recent central bank asset purchase programmes. International Banking and Financial Market Developments 3, 73.Google Scholar
Meaning, J. and Zhu, F. (2012) The impact of Federal Reserve asset purchase programmes: Another twist. BIS Quarterly Review, 23.Google Scholar
Mian, A. and Sufi, A. (2011) House prices, home equity-based borrowing, and the US household leverage crisis. American Economic Review 101(5), 2132–2156.CrossRefGoogle Scholar
Musso, A., Neri, S. and Stracca, L. (2011) Housing, consumption and monetary policy: How different are the US and the euro area? Journal of Banking and Finance 35(11), 3019–3041.CrossRefGoogle Scholar
Ngo, P. V. (2015) Household leverage, housing markets, and macroeconomic fluctuations. Journal of Macroeconomics 44, 191–207.CrossRefGoogle Scholar
Primiceri, G. E. (2005) Time varying structural vector autoregressions and monetary policy. The Review of Economic Studies 72(3), 821–852.CrossRefGoogle Scholar
Punzi, M. T. and Kauko, K. (2015) Testing the global banking glut hypothesis. Journal of Financial Stability 19, 128–151.CrossRefGoogle Scholar
Sá, F. and Wieladek, T. (2015) Capital inflows and the US housing boom. Journal of Money, Credit and Banking 47(S1), 221–256.CrossRefGoogle Scholar
Sims, C. A. (1992) Interpreting the macroeconomic time series facts: The effects of monetary policy. European Economic Review 36(5), 975–1000.CrossRefGoogle Scholar
Sims, C. A., and Zha, T. (2006) Were there regime switches in U.S. monetary policy? The American Economic Review 96(1), 54–81.CrossRefGoogle Scholar
Uhlig, H. (1997) Bayesian vector autoregressions with stochastic volatility. Econometrica: Journal of the Econometric Society 65(1), 59–73.CrossRefGoogle Scholar
Uhlig, H. (2005) What are the effects of monetary policy on output? Results from an agnostic identification procedure. Journal of Monetary Economics 52(2), 381–419.CrossRefGoogle Scholar
Vargas-Silva, C. (2008) Monetary policy and the US housing market: A VAR analysis imposing sign restrictions. Journal of Macroeconomics 30(3), 977–990.CrossRefGoogle Scholar
Walentin, K. (2014) Business cycle implications of mortgage spreads. Journal of Monetary Economics 67, 62–77.CrossRefGoogle Scholar
Wu, J. C. and Xia, F. D. (2016) Measuring the macroeconomic impact of monetary policy at the zero lower bound. Journal of Money, Credit and Banking 48(2-3), 253–291.CrossRefGoogle Scholar