Macroprudential Policy and Housing Wealth Inequality: Evidence from the Euro Area, with Álvaro Fernández-Gallardo (Bank of Spain).
We estimate the impact of macroprudential policy on housing wealth inequality among euro area households. We begin by employing narrative-identified macroprudential policy shocks within a local projection framework to identify the aggregate causal effects of these policies on credit and house prices in Germany, France, Italy, and Spain. Next, we distribute the aggregate effects across households through a reduced-form simulation using micro-level data from individual households. Our analysis evaluates three counterfactual scenarios following a policy shock: (i) households excluded from the housing market due to limited mortgage access, (ii) households affected by house price changes triggered by the policy shock, and (iii) a scenario that combines both mechanisms. Comparing net housing wealth across income quintiles against a baseline without regulation, we find that macroprudential policy reduces net housing wealth across income groups. Households in the middle income quintile experience the largest reductions, followed by bottom-income households and, finally, those in the top quintile, thereby increasing housing wealth inequality. We validate the simulation results using time-series measures of housing wealth inequality, highlighting the role of macroprudential policies in influencing wealth distribution.
Presented at: 1st Madrid Macro Mountain Conference 2025, 4th CEMLA/Dallas Fed Financial Stability Workshop 2025 , SAEe 2025.
There is a consensus in the literature that the effect of monetary policy on local housing markets is not homogeneous across regions. Local factors explaining this heterogeneity have typically been considered to be constant over time. In this paper, I demonstrate for the case of the U.S. that the differential effect of monetary policy across regions is driven by time-varying factors, such as local housing supply elasticities and local credit conditions. My empirical analysis suggests that an expansionary monetary policy produces a larger and significant increase in house prices, and a lower and significant increase in housing supply in regions where supply elasticity is lower. In addition, I show that the impact of monetary policy on house prices and construction activity is larger in regions where financial deregulation occurred earlier.
Presented at: XV Jornadas Internacionales de Política Económica 2021
Networked UK Housing Markets: Implications for Systemic Risk and Macroprudential Design, with Iván Payá (UA). Draft coming soon!
This paper studies systemic risk in the UK housing market by characterizing the evolving network of regional house prices. We adopt a connectivity measure based on time-varying Granger causality to track the strength, direction, and persistence of interregional spillovers. Connectivity displays a persistent upward drift, with periodic fluctuations over the sample, indicating an increasing potential for housing-market contagion. Decomposing connectivity into centrality and fragility reveals a stable structure: house prices in southern regions consistently lead house price movements in northern regions, Wales, Scotland, and Northern Ireland. Our analysis also uncovers a sharply differentiated role of London’s two sub-regions within the UK housing network. A key finding is that housing connectivity is counter-cyclical with the house price cycle. Linkages strengthen during downturns, implying that systemic fragility rises precisely when house prices are falling and balance sheets are under pressure, thereby heightening the scope for amplification mechanisms. In addition, housing-market connectivity exhibits no systematic association with regional business-cycle co-movement, a disconnect that may have consequences for housing affordability. Finally, we show that the transmission of macroprudential policy depends on the state of the housing network, operating in part through spillover channels embedded in regional connectedness. These results underscore housing connectivity as a state variable for financial stability and inform the design of macroprudential and broader stabilization policies.
Presented at: 4th CEMLA/Dallas Fed Financial Stability Workshop 2025.
The Unintended consequences of Covid-19 on Human Capital Accumulation, with Enrique Martínez-García (Dallas FED), Iván Payá (UA), and Tryg Aanenson (Dallas FED).
The effects of monetary policy on income and wealth inequality in the US. Exploring different channels, with Juan-Francisco Albert (UV) and Antonio Peñalver (UMH). Structural Change and Economic Dynamics (2020), 55, 88-106.
We assess the effects of monetary policy shocks on income and wealth inequality through direct inequality measures and by analyzing several transmission channels explored in recent literature. Furthermore, we analyze two additional channels: the Housing and the Fiscal channels. The methodology adopted is a Bayesian proxy SVAR using a high-frequency identification based on the external instruments approach. Our own policy shocks are constructed for this purpose. The results show that an expansionary monetary policy shock does not have a significant effect on income inequality due to the existence of opposite channels, whereas it increases wealth inequality mainly through the portfolio channel.