Corsetti, G., Duarte, J. B. and Mann, S.
One Money, Many Markets - A Factor Model Approach to Monetary Policy in the Euro Area with High-Frequency Identification
WP Number: 1806
Abstract: We reconsider the effects of common monetary policy shocks across countries in the euro area, using a data-rich factor model and identifying shocks with high-frequency surprises around policy announcements. We show that the degree of heterogeneity in the response to shocks, while being low in financial variables and output, is significant in consumption, consumer prices and macro variables related to the labour and housing markets. Mirroring country-specific institutional and market differences, we find that home ownership rates are significantly correlated with the strength of the housing channel in monetary policy transmission. We document a high dispersion in the response to shocks of house prices and rents and show that, similar to responses in the US, these variables tend to move in different directions.
Keywords: Monetary Policy, High-Frequency Identification, Monetary Union, Labour Market, Housing Market
JEL Codes: E21 E31 E44 E52 F44 F45
Author links: Giancarlo Corsetti
PDF: wp1806.pdf 
Open Access Link: 10.17863/CAM.21792
Keynes Fund Project(s):
Monetary Policy, Housing and Consumption in the Euro Area (JHOH)
Theme: transmission
Published Version of Paper: One Money, Many Markets - Monetary Transmission and Housing Financing in the Euro Area, Corsetti, G., Duarte, J. B. and Mann, S., Journal of the European Economic Association, accepted (2021)