Housing finance and monetary policy

We study how the structure of housing finance affects the transmission of monetarypolicy shocks. We document three main facts: first, the features of residentialmortgage markets differ markedly across industrialized countries; second, and accordingto a wide range of indicators, the transmission of monetary policy shocks toresidential investment and house prices is significantly stronger in those countrieswith larger flexibility/development of mortgage markets; third, the transmission toconsumption is stronger only in those countries where mortgage equity release iscommon and mortgage contracts are predominantly of the variable-rate type. Webuild a two-sector DSGE model with price stickiness....