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Rented vs. Owner-Occupied Housing and Monetary Policy

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  • Margarta Rubio

Abstract

The aim of this paper is to show how housing tenure (rented vs. owner-occupied) affects monetary policy. In order to do that, I propose a dynamic stochastic general equilibrium model with housing, both owned and rented. First, I analyze how, in the model, preference parameters, fiscal incentives and institutional factors determine the rental market share and the residential debt-to-GDP ratio. Then, within this framework, I study how the transmission and optimality of monetary policy differ depending on these factors. From a positive perspective, impulse responses illustrate differences in the monetary transmission mechanism. In normative terms, results show that when the relative size of the rental market is larger, monetary policy is more stabilizing. An optimal monetary policy analysis also suggests that in this case, monetary policy should respond more aggressively to inflation and disregard output, since the financial accelerator effects are weaker.

Suggested Citation

  • Margarta Rubio, 2014. "Rented vs. Owner-Occupied Housing and Monetary Policy," Discussion Papers 2014/09, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    • Handle: RePEc:not:notcfc:14/09
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    File URL: https://www.nottingham.ac.uk/cfcm/documents/papers/cfcm-2014-09.pdf
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    References listed on IDEAS

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    6. Oswald Andrew J., 1996. "A Conjecture on the Explanation for High Unemployment in the Industrialized Nations : Part I," The Warwick Economics Research Paper Series (TWERPS) 475, University of Warwick, Department of Economics.
    7. Angel, Schlomo, 2000. "Housing Policy Matters: A Global Analysis," OUP Catalogue, Oxford University Press, number 9780195137156.
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    19. Lucía Cuadro Sáez & Luna Romo & Margarita Rubio, 2010. "El mercado hipotecario residencial en Estados Unidos. Evolución, estructura e interrelación con la crisis," Boletín Económico, Banco de España, issue JUN, pages 88-103, Junio.
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    1. Mariano Bosch & M. Carnero & Lídia Farré, 2015. "Rental housing discrimination and the persistence of ethnic enclaves," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 6(2), pages 129-152, June.

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    Keywords

    Housing market; rental; owner-occupied housing; monetary policy;
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