Corsetti, G., Duarte, J. B. and Mann, S.
One Money, Many Markets
Journal of the European Economic Association
Vol. 20(1) pp. 513–548 (2021)
Abstract: We study the transmission of monetary shocks across euro-area countries using a dynamic factor model and high-frequency identification. We develop a methodology to assess the degree of heterogeneity, which we find to be low in financial variables and output, but significant in consumption, consumer prices, and variables related to local housing and labor markets. Building a small open economy model featuring a housing sector and calibrating it to Spain, we show that varying the share of adjustable-rate mortgages and loan-to-value ratios explains up to one-third of the cross-country heterogeneity in the response of output and private consumption.
Keywords: Monetary Policy, High-Frequency Identification, Monetary Union, Housing Market, Loan-to-value Ratio, Adjustable Mortgage Rates
JEL Codes: E21, E31, E44, E52, F44, F45
Author links: Giancarlo Corsetti
Publisher's Link: https://doi.org/10.1093/jeea/jvab030 
Keynes Fund Project(s):
Monetary Policy, Housing and Consumption in the Euro Area (JHOH)
Cambridge-INET Working Paper Version of Paper: One Money, Many Markets - A Factor Model Approach to Monetary Policy in the Euro Area with High-Frequency Identification, Corsetti, G., Duarte, J. B. and Mann, S., (2018)