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Faculty of Economics


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


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  


Open Access Link:

Keynes Fund Project(s):
Monetary Policy, Housing and Consumption in the Euro Area (JHOH)  

Published Version of Paper: One Money, Many Markets, Corsetti, G., Duarte, J. B. and Mann, S., Journal of the European Economic Association (2021)

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