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Monetary policy and housing investment in the euro area and the United States

Author

Listed:
  • Battistini, Niccolò
  • Delle Chiaie, Simona
  • Gareis, Johannes

Abstract

This box analyses the dynamics of housing investment in the euro area and the United States and discusses the impact of the recent monetary policy tightening on future housing investment in the euro area. Building on the literature, the box argues that deeper mortgage markets, as reflected in higher levels of household mortgage indebtedness, securitisation and leverage, strengthen the transmission of monetary policy shocks to housing investment. In the euro area, where the mortgage markets are less deep, housing investment is found to react relatively less to monetary policy shocks than in the United States. As a result, housing investment in the euro area has been recently more sheltered from monetary policy tightening than housing investment in the United States. Despite this relative resilience of housing investment in the euro area, the box argues that most of the impact of tighter monetary policy in the euro area is still to materialise, thus clouding the outlook for housing investment. JEL Classification: E22, E44, E52

Suggested Citation

  • Battistini, Niccolò & Delle Chiaie, Simona & Gareis, Johannes, 2023. "Monetary policy and housing investment in the euro area and the United States," Economic Bulletin Boxes, European Central Bank, vol. 3.
    • Handle: RePEc:ecb:ecbbox:2023:0003:1
    Note: 753337
    as

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    More about this item

    Keywords

    Housing investment; monetary policy; mortgage debt;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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