THE TRANSMISSION OF MONETARY POLICY TO THE SPANISH REAL ESTATE MARKET

Price stability in the real-estate market is not explicitly within the specific goals of the European Central Bank, except for the effects which bubbles and their bursts may have in financial stability and the consumer price index. Economists and authorities disagree in whether monetary policy tools should be employed to prevent the creation of bubbles in the real-estate market or if the supervisory and macroprudential policy should be the one intended to intervene in this and many others asset markets. However, although monetary authorities do not directly intervene in the real-estate market with monetary policies, their decisions affect housing prices and performed transactions by means of different transmission channels. In this work, we carry out an empirical panel-data analysis of the Spanish real-estate market at a province-level. We worked with quarterly series from 2004 to 2022, both inclusive, to find out evidence of the effects of monetary variables on housing prices. Several different models are applied to the global market, the new housing market and the used housing market. Moreover, eminently touristic and non-touristic provinces are analysed separately. We found highly significant empirical evidence of the effects of monetary variables (interest rates and liquidity) and macroprudential policy on housing prices, both in touristic and non-touristic areas, with some exceptions in the used housing market which follows its own dynamics.