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Monetary Policy and Racial Inequality in Housing Markets: A Study of 140 US Metropolitan Areas

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  • Qi Li
  • Xu Zhang

Abstract

This paper investigates the differential impact of monetary policy on homeownership and housing returns among Black, Hispanic and White households. Using data on 13 million repeat sales from 1993 to 2020, we construct and analyze race-specific entries and exits of homeownership and housing returns for 140 metropolitan areas in the United States. Our findings reveal significant heterogeneity: for minority households, one unit of monetary tightening leads to a 15% lower housing return and a 31% lower entry into homeownership than White households. This heterogeneity primarily stems from the less favorable labor market responses of minority groups to contractionary monetary policy. These findings emphasize the unintended consequences of monetary policy on racial inequality in the housing market.

Suggested Citation

  • Qi Li & Xu Zhang, 2023. "Monetary Policy and Racial Inequality in Housing Markets: A Study of 140 US Metropolitan Areas," Staff Working Papers 23-62, Bank of Canada.
    • Handle: RePEc:bca:bocawp:23-62
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    References listed on IDEAS

    as
    1. Mark Gertler & Peter Karadi, 2015. "Monetary Policy Surprises, Credit Costs, and Economic Activity," American Economic Journal: Macroeconomics, American Economic Association, vol. 7(1), pages 44-76, January.
    2. Michael D. Bauer & Eric T. Swanson, 2023. "A Reassessment of Monetary Policy Surprises and High-Frequency Identification," NBER Macroeconomics Annual, University of Chicago Press, vol. 37(1), pages 87-155.
    3. Refet S Gürkaynak & Brian Sack & Eric Swanson, 2005. "Do Actions Speak Louder Than Words? The Response of Asset Prices to Monetary Policy Actions and Statements," International Journal of Central Banking, International Journal of Central Banking, vol. 1(1), May.
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    5. James H. Stock & Mark W. Watson, 2018. "Identification and Estimation of Dynamic Causal Effects in Macroeconomics Using External Instruments," Economic Journal, Royal Economic Society, vol. 128(610), pages 917-948, May.
    6. Martin Eichenbaum & Sergio Rebelo & Arlene Wong, 2022. "State-Dependent Effects of Monetary Policy: The Refinancing Channel," American Economic Review, American Economic Association, vol. 112(3), pages 721-761, March.
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    More about this item

    Keywords

    Monetary policy; Housing; Central bank research;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General

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