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Rented vs. owner-occupied housing and monetary policy

  • Margarita Rubio EMAIL logo
Veröffentlicht/Copyright: 26. September 2018
The B.E. Journal of Macroeconomics
Aus der Zeitschrift The B.E. Journal of Macroeconomics Band 19 Heft 1

Abstract

The aim of this paper is to show how housing tenure (rented vs.cowner-occupied) affects monetary policy. I propose a dynamic stochastic general equilibrium model with housing, both owned and rented. First, I analyze how, in the model, preference parameters, fiscal incentives, and institutional factors determine the rental market share and the residential debt-to-GDP ratio. Then, within this framework, I study how the transmission and optimality of monetary policy differ depending on these factors. From a positive perspective, impulse responses illustrate differences in the monetary transmission mechanism. I find that of all factors, tax incentives generate the largest differences. In normative terms, results show that when the relative size of the rental market is larger, monetary policy is more stabilizing. An optimal monetary policy analysis also suggests that in this case, monetary policy should respond more aggressively to inflation and disregard output, because the financial accelerator effects are weaker.

Keywords: housing market; monetary policy; owner-occupied housing; rental
JEL Classification: E21; E3; E51; E6

Acknowledgement

The author would like to thank seminar participants at the University of Nottingham, the National Bank of Poland. Thanks to Michal Rubaszek for his very useful comments. This paper was presented at the National Bank of Poland Conference, “The Monetary Transmission Mechanism in Diverse Economies,” 2013, the CGBCR Conference at the University of Manchester, the MMF, the XXII Encuentro de Economía Pública, SNDE 2015, and the 11th Dynare Conference. Special thanks to José E. Boscá for serving as a discussant and giving excellent comments. Part of this project was undertaken when the author was visiting the National Bank of Poland. She would like to thank them for their hospitality. All errors are mine.

Appendix

Figure 8: Tenure structure across countries. Percent of dwelling stock (2009).Source: OECD.
Figure 8:

Tenure structure across countries. Percent of dwelling stock (2009).

Source: OECD.

Figure 9: Tenant-landlord regulations in the private rental market (2009). Scale 0–6 increasing in protection for tenants.Source: OECD.
Figure 9:

Tenant-landlord regulations in the private rental market (2009). Scale 0–6 increasing in protection for tenants.

Source: OECD.

Figure 10: Tax relief on debt financing cost of home ownership (2009).Source: OECD.
Figure 10:

Tax relief on debt financing cost of home ownership (2009).

Source: OECD.

Table 6:

Enforcement contracts indicators (World Business Environment).

Justiceis slowis not affordabledoes not enforce decisionsis a great obstacle
[OLE6] France47.0%16.3%2.1%4.1%
Germany20.6%18.6%4.2%8.0%
Italy62.4%43.8%8.9%16.3%
Spain41.2%13.5%4.2%12.2%
UK17.3%18.2%1.0%2.0%
US23.2%25.3%7.1%2.2%

  1. Source: Mora-Sanguinetti (2011).

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Published Online: 2018-09-26

©2019 Walter de Gruyter GmbH, Berlin/Boston

Artikel in diesem Heft

  1. Frontiers
  2. The Precautionary Saving Effect of Government Consumption
  3. Advanced
  4. Optimal taxation under equilibrium unemployment and economic profits
  5. Labor supply, income distribution, and tax progressivity in a search model
  6. Housing market and labor market search
  7. Rented vs. owner-occupied housing and monetary policy
  8. On the cyclicality of real wages and wage differentials
  9. Aggregate implications of occupational inheritance in China and India
  10. Barriers to firm growth in open economies
  11. The role of IPRs on prices, wages and growth in a two country directed technical change model
  12. Fiscal counter-cyclicality and productive investment: evidence from advanced economies
  13. Contributions
  14. Is risk shock a key factor driving business cycles in China?
  15. Did capital replace labor? New evidence from offshoring
  16. International capital mobility and structural transformation
  17. Redistributive policies and technology diffusion
https://doi.org/10.1515/bejm-2016-0110
Schlagwörter für diesen Artikel
housing market; monetary policy; owner-occupied housing; rental

Artikel in diesem Heft

  1. Frontiers
  2. The Precautionary Saving Effect of Government Consumption
  3. Advanced
  4. Optimal taxation under equilibrium unemployment and economic profits
  5. Labor supply, income distribution, and tax progressivity in a search model
  6. Housing market and labor market search
  7. Rented vs. owner-occupied housing and monetary policy
  8. On the cyclicality of real wages and wage differentials
  9. Aggregate implications of occupational inheritance in China and India
  10. Barriers to firm growth in open economies
  11. The role of IPRs on prices, wages and growth in a two country directed technical change model
  12. Fiscal counter-cyclicality and productive investment: evidence from advanced economies
  13. Contributions
  14. Is risk shock a key factor driving business cycles in China?
  15. Did capital replace labor? New evidence from offshoring
  16. International capital mobility and structural transformation
  17. Redistributive policies and technology diffusion
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