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.
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.
Connectivity in the UK housing regional markets, with Iván Payá (UA). Draft coming soon!
This paper examines the inter-temporal dynamics and characteristics of connectivity within the UK regional housing market, using a novel measure based on time-varying Granger causality. Our analysis reveals a clear and sustained upward trend in the overall connectivity of regional house prices in the UK, peaking around 2019. The decomposition of this connectivity shows a persistent structural pattern: Southern regions consistently act as dominant transmitters of price shocks, influencing Northern regions and Wales, which act as net receivers. London also demonstrates a particularly influential role during real estate boom periods. Crucially, our results indicate that regional housing market connectivity is a-cyclical, meaning that it is not systematically linked to either the housing cycle or the business cycle. We also investigate the role of housing connectivity in the effectiveness of monetary policy. These findings offer significant implications for macroeconomic stabilization, financial stability, and housing affordability policies.
The impact of COVID-19 on housing preferences, 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.