Liquidity, interest rates and house prices in the Euro area: a DSGE analysis
In this paper, we propose a two-country monetary union DSGE model with housing, in order to study how different shocks contributed to the increase in housing prices and credit in the EMU prior to the crisis. One of the countries is calibrated to represent the core group in the Euro area while the ot...
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| Format: | Article |
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Emerald
2016
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| Online Access: | https://eprints.nottingham.ac.uk/30463/ |
| _version_ | 1848793990467420160 |
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| author | Rubio, Margarita Carrasco-Gallego, José A. |
| author_facet | Rubio, Margarita Carrasco-Gallego, José A. |
| author_sort | Rubio, Margarita |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | In this paper, we propose a two-country monetary union DSGE model with housing, in order to study how different shocks contributed to the increase in housing prices and credit in the EMU prior to the crisis. One of the countries is calibrated to represent the core group in the Euro area while the other one corresponds to the periphery. First, we explore how a liquidity shock (or a decrease in the interest rate) affects house prices and the real economy through the asset price and the collateral channel. Then, we analyze how a house price shock in the periphery and a technology shock in the core countries are transmitted to the both economies. We find that a combination of an increase in liquidity in the Euro area coming from the common monetary policy, together with asymmetric house price and technology shocks, can explain the increase in house prices in the Euro area and the stronger credit growth in the peripheral economies in the pre-crisis period. |
| first_indexed | 2025-11-14T19:09:04Z |
| format | Article |
| id | nottingham-30463 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| last_indexed | 2025-11-14T19:09:04Z |
| publishDate | 2016 |
| publisher | Emerald |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-304632020-05-04T17:24:54Z https://eprints.nottingham.ac.uk/30463/ Liquidity, interest rates and house prices in the Euro area: a DSGE analysis Rubio, Margarita Carrasco-Gallego, José A. In this paper, we propose a two-country monetary union DSGE model with housing, in order to study how different shocks contributed to the increase in housing prices and credit in the EMU prior to the crisis. One of the countries is calibrated to represent the core group in the Euro area while the other one corresponds to the periphery. First, we explore how a liquidity shock (or a decrease in the interest rate) affects house prices and the real economy through the asset price and the collateral channel. Then, we analyze how a house price shock in the periphery and a technology shock in the core countries are transmitted to the both economies. We find that a combination of an increase in liquidity in the Euro area coming from the common monetary policy, together with asymmetric house price and technology shocks, can explain the increase in house prices in the Euro area and the stronger credit growth in the peripheral economies in the pre-crisis period. Emerald 2016-01-01 Article PeerReviewed Rubio, Margarita and Carrasco-Gallego, José A. (2016) Liquidity, interest rates and house prices in the Euro area: a DSGE analysis. Journal of European Real Estate Research, 9 (1). pp. 4-25. ISSN 1753-9269 Liquidity Interest Rates Monetary Policy House Prices Collateral Effects Asymmetric Shocks Asset Prices http://www.emeraldinsight.com/doi/abs/10.1108/JERER-03-2015-0014 doi:10.1108/JERER-03-2015-0014 doi:10.1108/JERER-03-2015-0014 |
| spellingShingle | Liquidity Interest Rates Monetary Policy House Prices Collateral Effects Asymmetric Shocks Asset Prices Rubio, Margarita Carrasco-Gallego, José A. Liquidity, interest rates and house prices in the Euro area: a DSGE analysis |
| title | Liquidity, interest rates and house prices in the Euro area: a DSGE analysis |
| title_full | Liquidity, interest rates and house prices in the Euro area: a DSGE analysis |
| title_fullStr | Liquidity, interest rates and house prices in the Euro area: a DSGE analysis |
| title_full_unstemmed | Liquidity, interest rates and house prices in the Euro area: a DSGE analysis |
| title_short | Liquidity, interest rates and house prices in the Euro area: a DSGE analysis |
| title_sort | liquidity, interest rates and house prices in the euro area: a dsge analysis |
| topic | Liquidity Interest Rates Monetary Policy House Prices Collateral Effects Asymmetric Shocks Asset Prices |
| url | https://eprints.nottingham.ac.uk/30463/ https://eprints.nottingham.ac.uk/30463/ https://eprints.nottingham.ac.uk/30463/ |