The transmission of macroeconomic shocks and the housing market

Housing services are not only an important consumption good. The housing asset and the corresponding mortgage liability are the dominant items in the balance sheet of most homeowners. The great recession and the ensuing financial and economic crises in the US and Europe have demonstrated that the transmission of macroeconomic shocks to the economy is shaped by the housing and mortgage market. Understanding the details of how this market affects the transmission is particularly important in low-interest rate environments with inflated house prices that pose risks for economic and financial stability. The proposed project consists of three subprojects that will be part of dissertations. Each subproject tackles the research topic from a different angle, providing new insights on (i) how monetary policy shocks transmit to the housing market, (ii) how fiscal tax incentives affect the macroeconomic consequences of house price corrections, and (iii) how the Covid-19 macroeconomic shock passes through to rents and house prices depending on the local industry and employment structure.