The analysis of monetary and fiscal policy belongs to the central issues in macroeconomics. This thesis provides new insights concerning current monetary and fiscal policy issues by accounting for the role of housing. Recent studies focusing on the interplay of housing and the macroeconomy have outlined the importance of housing along several dimensions, like for business cycles or asset pricing. This thesis analyzes the implications of housing for the ot be enforced, lenders will request collateral from borrowers. This collateral is typically the house of a borrowconduct of monetary and fiscal policy. In the models used in this thesis, the importance of housing stems from its usage as collateral in the presence of financial market imperfections. When debt repayment canner. In each chapter of this thesis, we consider models, which incorporate household sectors consisting of lenders and borrowers who face a collateral constraint. Accounting for the role of housing as collateral, we study the following policy issues. First, we analyze in chapter 2 the preferential tax treatment of housing, like the deductibility of mortgage interest payments from income that is observed in many industrialized countries. In the US, for instance, total housing subsidies added up to 220 billion dollars in 2011, corresponding to 1.5% of GDP. We find that these subsidies can be justified by means of an optimal taxation approach once one accounts for the role of housing as collateral. Second, we quantify in chapter 3 (coauthored with Andreas Schabert) the macroeconomic effects of the Federal Reserve's purchases of mortgage-backed securities, which is one of the unconventional policy measures the Fed used for the first time in its history during the financial crisis after hitting the zero lower bound on the policy rate. We analyze the macroeconomic effects of these purchases, which added up to more than $2 trillion in both MBS purchase programs conducted in the first and third round of quantitative easing programs. We find that they had considerable expansionary effects on output, consumption and prices providing a rationale for this new type of policy measure. Third, chapter 4 provides a theoretical framework with occasionally binding collateral constraints in which government spending is more effective in recessions compared to expansions consistent with what is found by recent empirical research. Moreover, based on this framework we quantify the differences between government spending multipliers in recessions and expansions and find that these are considerably large. To summarize, the studies in this thesis emphasize the importance of housing for monetary and fiscal policy, especially in serving as collateral for private loans. They show how accounting for this role of housing, provides novel insights concerning current monetary and fiscal policy issues ranging from housing subsidies, over the Fed's MBS purchases to the effectiveness of government spending in recessions and expansions.
