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When Does Monetary Policy Sway House Prices? IES researchers published in the IMF Economic Review


The official journal of the International Monetary Fund, IMF Economic Review, presents articles that offer a high-level view of economics, including such topics as Macroeconomic implications of financial crises; Economic and financial spillovers; Policy responses to commodity price movements; and Monetary and macroprudential policies.

In the latest issue of this prestigious journal, the article  When Does Monetary Policy Sway House Prices? A Meta-Analysis was published, co-authored by our colleague, Professor Tomáš Havránek and our PhD students, Dominika Ehrenbergerová and Josef Bajzík. Their research focused on the effect of monetary policy on house prices. The authors show in the article that the effect is strongest at the end of the economic cycle, when property prices usually rise the fastest.  

Several central banks have leaned against the wind in the housing market by increasing the policy rate preemptively to prevent a bubble. Yet the empirical literature provides mixed results on the impact of short-term interest rates on house prices: the estimated semi-elasticities range from −12 to positive values. To assign a pattern to these differences, we collect 1,555 estimates from 37 individual studies that cover 45 countries and 72 years. We then relate the estimates to 39 characteristics of the financial system, business cycle, and estimation approach. Our main results are threefold. First, the mean reported estimate is exaggerated by publication bias, because insignificant results are underreported. Second, inclusion of controls correlated with policy rates (credit or money supply) decreases the estimated effects of policy rates on house prices. Third, the effects are stronger in countries with more developed mortgage markets and generally later in the cycle when the yield curve is flat and house prices enter an upward spiral.

Congratulations on the publication!

Autor - Barbora Holková



December 2022




Patria Finance
Česká Spořitelna