House prices, consumption, and monetary policy: a financial accelerator approach

We consider a general equilibrium model with frictions in credit markets used by households. Inour economy, houses provide housing services to consumers and serve as collateral to lower borrowingcost.We show that this amplifies and propagates the effect of monetary policy shocks on housinginvestment, house prices and consumption.We also consider the effect of a structural change in creditmarkets that lowers the transaction costs of additional borrowing against housing equity. We showthat such a change would increase the effect of monetary policy shocks on consumption, but woulddecrease the effect on house prices and housing investment.[...]