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Asymmetric Effects of Monetary Policy in Regional Housing Markets

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Abstract

The responsiveness of house prices to monetary policy shocks depends on the nature of the shock—expansionary versus contractionary—and on local housing supply elasticities. These findings are established using a panel of 263 US metropolitan areas. Expansionary monetary policy shocks have a larger impact on house prices in supply-inelastic areas. Contractionary shocks are orthogonal to housing supply elasticities. In supply-elastic areas, contractionary shocks have a greater impact on house prices than expansionary shocks do. The opposite holds true in supply-inelastic areas. We attribute this to asymmetric housing supply adjustments.

Citation

Aastveit, Knut Are, and André K. Anundsen. 2022. "Asymmetric Effects of Monetary Policy in Regional Housing Markets." American Economic Journal: Macroeconomics, 14 (4): 499-529. DOI: 10.1257/mac.20190011

Additional Materials

JEL Classification

  • E32 Business Fluctuations; Cycles
  • E43 Interest Rates: Determination, Term Structure, and Effects
  • E52 Monetary Policy
  • R21 Urban, Rural, Regional, Real Estate, and Transportation Economics: Housing Demand
  • R31 Housing Supply and Markets
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