Financial market heterogeneity: Implications for the EMU

Arbeitspapier

This paper evaluates business cycle and welfare effects of cross-country mortgage market heterogeneity for a monetary union. By employing a calibrated two-country New Keynesian DSGE model with collateral constraints tied to housing values, we show that a change in cross-country institutional characteristics of mortgage markets, such as the LTV ratio, is likely to be an important driver of an asymmetric development in housing markets and real economic activity of member states. Our welfare analysis suggests that the welfare of the home country where the reform is implemented increases substantially. In contrast, the rest of the EMU's welfare falls due to spillover effects with magnitude depending on the size of the home country.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: W.E.P. - Würzburg Economic Papers ; No. 90

Classification and Topics

• Classification: Wirtschaft ; Business Fluctuations; Cycles ; Financial Markets and the Macroeconomy ; Open Economy Macroeconomics
• Subject: housing ; LTV ratio ; monetary union ; cross-country heterogeneity

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gareis, Johannes ; Mayer, Eric
• Event: Veröffentlichung
• (who): University of Würzburg, Department of Economics
• (where): Würzburg
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/65864
• Last update: 10.03.2025, 11:45 AM CET