Pub Date : 2025-12-01DOI: 10.1016/j.cbrev.2025.100219
Juan-Francisco Albert , Nerea Gómez-Fernández
Utilizing the Realtime Inequality database, this paper employs a Bayesian Proxy SVAR model to examine the distributional effects of monetary policy on various dimensions of income and wealth inequality in the United States. This study introduces a novel approach by utilizing new monthly series to accurately estimate the final effects and transmission channels. The results indicate a U-shaped pattern in the effects of expansionary monetary policy on inequality. In the case of income, both the bottom 50 % and the top 10 % are the main beneficiaries, while the middle 40 % experience a comparatively smaller positive impact. However, regarding wealth, it is the top 10 % who benefit most prominently from expansionary monetary policy. Identified channels, including earnings heterogeneity and income composition, contribute to these findings. This research enhances understanding of monetary policy's nuanced transmission channels, providing timely insights for policymakers.
{"title":"Deciphering the U-shaped impact: High frequency data and monetary policy effects on inequality","authors":"Juan-Francisco Albert , Nerea Gómez-Fernández","doi":"10.1016/j.cbrev.2025.100219","DOIUrl":"10.1016/j.cbrev.2025.100219","url":null,"abstract":"<div><div>Utilizing the Realtime Inequality database, this paper employs a Bayesian Proxy SVAR model to examine the distributional effects of monetary policy on various dimensions of income and wealth inequality in the United States. This study introduces a novel approach by utilizing new monthly series to accurately estimate the final effects and transmission channels. The results indicate a U-shaped pattern in the effects of expansionary monetary policy on inequality. In the case of income, both the bottom 50 % and the top 10 % are the main beneficiaries, while the middle 40 % experience a comparatively smaller positive impact. However, regarding wealth, it is the top 10 % who benefit most prominently from expansionary monetary policy. Identified channels, including earnings heterogeneity and income composition, contribute to these findings. This research enhances understanding of monetary policy's nuanced transmission channels, providing timely insights for policymakers.</div></div>","PeriodicalId":43998,"journal":{"name":"Central Bank Review","volume":"25 4","pages":"Article 100219"},"PeriodicalIF":1.2,"publicationDate":"2025-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145736724","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper analyzes how unexpected oil supply shocks shape firms’ inflation expectations and real activity using a dataset of Turkish manufacturing firms. At the aggregate level, oil supply shocks significantly increase both actual CPI inflation and firms’ average inflation expectations, with effects persisting for up to 15 months. Our firm-level analysis reveals substantial heterogeneity: smaller and highly leveraged firms respond more strongly to oil shocks, significantly raising their expectations for inflation, own prices, and unit costs compared to larger, financially robust firms. Furthermore, these shocks worsen firms’ business outlook and lead to tangible reductions in capacity utilization. Leveraging administrative firm-to-firm transaction data, we show that oil shocks also reduce firms’ sales, purchases, and the number of trading partners — particularly among financially constrained firms — highlighting real dislocations that propagate through production networks. In contrast, carbon price shocks and global temperature changes have no significant impact, consistent with the absence of a binding carbon pricing mechanism in Türkiye during the study period. Our findings highlight oil supply shocks as a crucial driver of firm-level expectations and real activity, emphasizing the importance of incorporating energy-cost dynamics into inflation-targeting frameworks.
{"title":"How do oil supply and carbon policy affect firms’ expectations and decisions?","authors":"Okan Akarsu , Emrehan Aktug , Huzeyfe Torun , Cihan Yalçın","doi":"10.1016/j.cbrev.2025.100228","DOIUrl":"10.1016/j.cbrev.2025.100228","url":null,"abstract":"<div><div>This paper analyzes how unexpected oil supply shocks shape firms’ inflation expectations and real activity using a dataset of Turkish manufacturing firms. At the aggregate level, oil supply shocks significantly increase both actual CPI inflation and firms’ average inflation expectations, with effects persisting for up to 15 months. Our firm-level analysis reveals substantial heterogeneity: smaller and highly leveraged firms respond more strongly to oil shocks, significantly raising their expectations for inflation, own prices, and unit costs compared to larger, financially robust firms. Furthermore, these shocks worsen firms’ business outlook and lead to tangible reductions in capacity utilization. Leveraging administrative firm-to-firm transaction data, we show that oil shocks also reduce firms’ sales, purchases, and the number of trading partners — particularly among financially constrained firms — highlighting real dislocations that propagate through production networks. In contrast, carbon price shocks and global temperature changes have no significant impact, consistent with the absence of a binding carbon pricing mechanism in Türkiye during the study period. Our findings highlight oil supply shocks as a crucial driver of firm-level expectations and real activity, emphasizing the importance of incorporating energy-cost dynamics into inflation-targeting frameworks.</div></div>","PeriodicalId":43998,"journal":{"name":"Central Bank Review","volume":"25 ","pages":"Article 100228"},"PeriodicalIF":1.2,"publicationDate":"2025-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145738896","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-01DOI: 10.1016/j.cbrev.2025.100227
Michael Pedersen
This paper examines how U.S. consumers form twelve-month-ahead expectations about gasoline prices using data from the New York Fed's Survey of Consumer Expectations (SCE). Understanding how households interpret movements in a salient and volatile price component helps clarify the behavioral mechanisms underlying inflation dynamics. The analysis combines SCE microdata with state-level gasoline prices, expert forecasts from the U.S. Energy Information Administration (EIA), and a measure of consumer disagreement within a panel regression framework. The EIA forecast serves as a proxy for other information consumers may be exposed to, such as media coverage or expert assessments. The results show that consumers incorporate both recent local price changes and broader informational cues, but the relative importance of these sources differs across demographic groups and inflation environments. Older respondents react more strongly to observed price changes, consistent with experience-based learning, whereas men and those with higher education and income place greater weight on professional information. Interestingly, and in contrast to evidence on general inflation expectations, men report higher expected gasoline price increases than women. Consumers also exhibit asymmetric behavior, updating expectations mainly when gasoline prices fall, and the influence of informational signals is stronger when inflation is moderate. Overall, the findings indicate that expectation formation is heterogeneous and state-dependent, shaped by differences in information access and processing, with implications for inflation persistence and monetary policy communication.
{"title":"Consumers’ gasoline price expectations: Who reacts to what?","authors":"Michael Pedersen","doi":"10.1016/j.cbrev.2025.100227","DOIUrl":"10.1016/j.cbrev.2025.100227","url":null,"abstract":"<div><div>This paper examines how U.S. consumers form twelve-month-ahead expectations about gasoline prices using data from the New York Fed's <em>Survey of Consumer Expectations</em> (SCE). Understanding how households interpret movements in a salient and volatile price component helps clarify the behavioral mechanisms underlying inflation dynamics. The analysis combines SCE microdata with state-level gasoline prices, expert forecasts from the U.S. Energy Information Administration (EIA), and a measure of consumer disagreement within a panel regression framework. The EIA forecast serves as a proxy for other information consumers may be exposed to, such as media coverage or expert assessments. The results show that consumers incorporate both recent local price changes and broader informational cues, but the relative importance of these sources differs across demographic groups and inflation environments. Older respondents react more strongly to observed price changes, consistent with experience-based learning, whereas men and those with higher education and income place greater weight on professional information. Interestingly, and in contrast to evidence on general inflation expectations, men report higher expected gasoline price increases than women. Consumers also exhibit asymmetric behavior, updating expectations mainly when gasoline prices fall, and the influence of informational signals is stronger when inflation is moderate. Overall, the findings indicate that expectation formation is heterogeneous and state-dependent, shaped by differences in information access and processing, with implications for inflation persistence and monetary policy communication.</div></div>","PeriodicalId":43998,"journal":{"name":"Central Bank Review","volume":"25 ","pages":"Article 100227"},"PeriodicalIF":1.2,"publicationDate":"2025-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145738885","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-01DOI: 10.1016/j.cbrev.2025.100223
Carlos A. Medel
This article examines the determinants of the anchoring of inflation expectations in Chile, both within and beyond the two-year policy horizon. Despite the heightened sensitivity of expectations to actual inflation developments following the recent inflation surge, evidence from linear and non-linear time-series models, as well as binary-outcome analyses, suggests that confidence in the Central Bank’s official inflation forecasts can persist, even in the presence of exogenous influences such as global and domestic economic policy uncertainty and geopolitical tensions. The findings indicate that, notwithstanding observed deviations from the inflation target, full confidence in the monetary policy stance can be maintained. Robustness checks confirm the baseline results when incorporating the full set of responses from the widely used inflation expectations survey. Nonetheless, financial market participants tend to anchor their expectations more firmly to the target, in contrast to experts and academics, who respond more strongly to new data. Members of the corporate sector appear to lie between these two groups in their expectations behaviour.
{"title":"Exogenous influences on long-term inflation expectation deviations: Evidence from Chile","authors":"Carlos A. Medel","doi":"10.1016/j.cbrev.2025.100223","DOIUrl":"10.1016/j.cbrev.2025.100223","url":null,"abstract":"<div><div>This article examines the determinants of the anchoring of inflation expectations in Chile, both within and beyond the two-year policy horizon. Despite the heightened sensitivity of expectations to actual inflation developments following the recent inflation surge, evidence from linear and non-linear time-series models, as well as binary-outcome analyses, suggests that confidence in the Central Bank’s official inflation forecasts can persist, even in the presence of exogenous influences such as global and domestic economic policy uncertainty and geopolitical tensions. The findings indicate that, notwithstanding observed deviations from the inflation target, full confidence in the monetary policy stance can be maintained. Robustness checks confirm the baseline results when incorporating the full set of responses from the widely used inflation expectations survey. Nonetheless, financial market participants tend to anchor their expectations more firmly to the target, in contrast to experts and academics, who respond more strongly to new data. Members of the corporate sector appear to lie between these two groups in their expectations behaviour.</div></div>","PeriodicalId":43998,"journal":{"name":"Central Bank Review","volume":"25 ","pages":"Article 100223"},"PeriodicalIF":1.2,"publicationDate":"2025-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145738894","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-01DOI: 10.1016/j.cbrev.2025.100226
Aslıhan Atabek Demirhan
Firms' pricing decisions play a pivotal role in shaping inflation dynamics through their collective price-setting behaviour. This study investigates firms’ pricing behaviour in the Turkish manufacturing sector using firm-level Business Tendency Survey data. Newly constructed monthly indicators capture the frequency and synchronization of price changes, providing insights into how price-setting dynamics evolve under high and volatile inflation. The results show that state-dependent pricing has become increasingly dominant in recent years, with firms responding more rapidly to cost and demand shocks while exhibiting reduced price rigidity. Sectoral evidence reveals marked heterogeneity across industries, reflecting differences in market structures and cost pressures. Moreover, firms display asymmetric behaviour, adjusting prices upward faster than downward, which contributes to inflation persistence. Overall, the findings highlight that the pricing behaviour of Turkish manufacturing firms is shaped by elevated inflation and economic shocks. These dynamics have important implications for monetary policy, underscoring the importance of expectation management and targeted interventions to support the ongoing disinflation process.
{"title":"Monitoring pricing behaviour dynamics through the lens of business tendency surveys∗","authors":"Aslıhan Atabek Demirhan","doi":"10.1016/j.cbrev.2025.100226","DOIUrl":"10.1016/j.cbrev.2025.100226","url":null,"abstract":"<div><div>Firms' pricing decisions play a pivotal role in shaping inflation dynamics through their collective price-setting behaviour. This study investigates firms’ pricing behaviour in the Turkish manufacturing sector using firm-level Business Tendency Survey data. Newly constructed monthly indicators capture the frequency and synchronization of price changes, providing insights into how price-setting dynamics evolve under high and volatile inflation. The results show that state-dependent pricing has become increasingly dominant in recent years, with firms responding more rapidly to cost and demand shocks while exhibiting reduced price rigidity. Sectoral evidence reveals marked heterogeneity across industries, reflecting differences in market structures and cost pressures. Moreover, firms display asymmetric behaviour, adjusting prices upward faster than downward, which contributes to inflation persistence. Overall, the findings highlight that the pricing behaviour of Turkish manufacturing firms is shaped by elevated inflation and economic shocks. These dynamics have important implications for monetary policy, underscoring the importance of expectation management and targeted interventions to support the ongoing disinflation process.</div></div>","PeriodicalId":43998,"journal":{"name":"Central Bank Review","volume":"25 ","pages":"Article 100226"},"PeriodicalIF":1.2,"publicationDate":"2025-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145738884","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-01DOI: 10.1016/j.cbrev.2025.100224
Fernando Borraz , Miguel Mello
This paper examines how the formation of inflation expectations and the magnitude of prediction errors vary among price setters based on the central bank’s communication and their level of information. We utilize dynamic panel data models to determine the importance of firms’ information about the prevailing inflation rate and the official inflation target. Our analysis reveals that the communicated tone of monetary policy amplifies the existing bias of the monetary policy instrument when these two are consistent. However, the credibility of the central bank’s communication diminishes when the stated tone and the implemented policy instruments diverge. By analyzing the interplay between information about inflation and the tone of the central bank’s monetary policy statements, we conclude that agents with partial information form their expectations distinctly. Notably, for these partially informed agents, the credibility of communication is not necessarily undermined by a mismatch between the stated tone and policy instruments. Furthermore, agents with complete information exhibit lower prediction errors.
{"title":"Communication, information and inflation expectations","authors":"Fernando Borraz , Miguel Mello","doi":"10.1016/j.cbrev.2025.100224","DOIUrl":"10.1016/j.cbrev.2025.100224","url":null,"abstract":"<div><div>This paper examines how the formation of inflation expectations and the magnitude of prediction errors vary among price setters based on the central bank’s communication and their level of information. We utilize dynamic panel data models to determine the importance of firms’ information about the prevailing inflation rate and the official inflation target. Our analysis reveals that the communicated tone of monetary policy amplifies the existing bias of the monetary policy instrument when these two are consistent. However, the credibility of the central bank’s communication diminishes when the stated tone and the implemented policy instruments diverge. By analyzing the interplay between information about inflation and the tone of the central bank’s monetary policy statements, we conclude that agents with partial information form their expectations distinctly. Notably, for these partially informed agents, the credibility of communication is not necessarily undermined by a mismatch between the stated tone and policy instruments. Furthermore, agents with complete information exhibit lower prediction errors.</div></div>","PeriodicalId":43998,"journal":{"name":"Central Bank Review","volume":"25 ","pages":"Article 100224"},"PeriodicalIF":1.2,"publicationDate":"2025-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145738886","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-01DOI: 10.1016/j.cbrev.2025.100225
Andriy Tsapin , Oleksandr Faryna
This paper investigates how households’ financial literacy influences their perceptions of past inflation and expectations of future price changes. Using novel survey data collected in Ukraine, we employ instrumental variable quantile regression models across various household subsamples to assess the asymmetric and heterogeneous effects of financial literacy on inflation-related beliefs. We find that the impact of financial literacy varies significantly across the distributions of inflation perceptions and expectations, shaped by distinct components – knowledge, behavior, and attitude – as well as by household characteristics such as size, income level, and place of residence. We also find that trust in the banking system enhances the accuracy of inflation beliefs, with a stronger effect as perceptions and expectations deviate from benchmarks. These findings have important implications for central banks seeking to anchor inflation expectations.
{"title":"The role of financial literacy in shaping inflation beliefs: The case of Ukraine","authors":"Andriy Tsapin , Oleksandr Faryna","doi":"10.1016/j.cbrev.2025.100225","DOIUrl":"10.1016/j.cbrev.2025.100225","url":null,"abstract":"<div><div>This paper investigates how households’ financial literacy influences their perceptions of past inflation and expectations of future price changes. Using novel survey data collected in Ukraine, we employ instrumental variable quantile regression models across various household subsamples to assess the asymmetric and heterogeneous effects of financial literacy on inflation-related beliefs. We find that the impact of financial literacy varies significantly across the distributions of inflation perceptions and expectations, shaped by distinct components – knowledge, behavior, and attitude – as well as by household characteristics such as size, income level, and place of residence. We also find that trust in the banking system enhances the accuracy of inflation beliefs, with a stronger effect as perceptions and expectations deviate from benchmarks. These findings have important implications for central banks seeking to anchor inflation expectations.</div></div>","PeriodicalId":43998,"journal":{"name":"Central Bank Review","volume":"25 ","pages":"Article 100225"},"PeriodicalIF":1.2,"publicationDate":"2025-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145738897","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-14DOI: 10.1016/j.cbrev.2025.100222
Günnur Ege Bilgin
I analyze the mechanism used to assign medical doctors to mandatory service positions in Türkiye. To address staffing gaps in underserved areas, the government requires newly graduated, specialized, or subspecialized doctors to work in designated hospitals. Doctors submit ranked preferences, and the current mechanism is equivalent to the Boston mechanism followed by a general lottery step, but without any priority structure on the hospital side. This lack of hospital preferences turns the assignment into a one-sided matching problem, where only doctors have preferences. Despite high satisfaction reports by the Ministry of Health – claiming most doctors are assigned to one of their top choices – the mechanism has significant drawbacks. Most importantly, the mechanism is not strategy-proof: doctors may benefit from misrepresenting their preferences. For example, some may list less-demanded but acceptable hospitals as top choices to avoid assignment to more undesirable locations. Such strategic behavior distorts the allocation and undermines transparency. Doctors also share strategies in online forums, introducing further inefficiencies. To address these issues, I propose replacing the current mechanism with random serial dictatorship (RSD). RSD is strategy-proof, eliminating incentives for manipulation, and offers a simpler, more transparent process for mandatory service assignments.
{"title":"Assigning doctors to mandatory service hospitals: a strategy-proof approach","authors":"Günnur Ege Bilgin","doi":"10.1016/j.cbrev.2025.100222","DOIUrl":"10.1016/j.cbrev.2025.100222","url":null,"abstract":"<div><div>I analyze the mechanism used to assign medical doctors to mandatory service positions in Türkiye. To address staffing gaps in underserved areas, the government requires newly graduated, specialized, or subspecialized doctors to work in designated hospitals. Doctors submit ranked preferences, and the current mechanism is equivalent to the Boston mechanism followed by a general lottery step, but without any priority structure on the hospital side. This lack of hospital preferences turns the assignment into a one-sided matching problem, where only doctors have preferences. Despite high satisfaction reports by the Ministry of Health – claiming most doctors are assigned to one of their top choices – the mechanism has significant drawbacks. Most importantly, the mechanism is not strategy-proof: doctors may benefit from misrepresenting their preferences. For example, some may list less-demanded but acceptable hospitals as top choices to avoid assignment to more undesirable locations. Such strategic behavior distorts the allocation and undermines transparency. Doctors also share strategies in online forums, introducing further inefficiencies. To address these issues, I propose replacing the current mechanism with random serial dictatorship (RSD). RSD is strategy-proof, eliminating incentives for manipulation, and offers a simpler, more transparent process for mandatory service assignments.</div></div>","PeriodicalId":43998,"journal":{"name":"Central Bank Review","volume":"25 4","pages":"Article 100222"},"PeriodicalIF":1.2,"publicationDate":"2025-10-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145326125","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-10DOI: 10.1016/j.cbrev.2025.100221
Burçin Kısacıkoğlu
This paper investigates the effects of uncertainty spillovers on emerging markets. We focus on COVID-19-related news as news about global uncertainty and estimate the dynamic response of high-frequency risk measures in emerging markets. Using heteroskedasticity-based estimation and aggregate emerging market indices, we show that heightened uncertainty increases government bond and CDS spreads and decreases stock prices. Using seven emerging markets, we show that country-level risk measures respond to uncertainty consistently with aggregate measures. We argue that the results are consistent with standard consumption-based asset pricing theory.
{"title":"Emerging market riskiness and uncertainty spillovers: Evidence from the COVID-19 pandemic","authors":"Burçin Kısacıkoğlu","doi":"10.1016/j.cbrev.2025.100221","DOIUrl":"10.1016/j.cbrev.2025.100221","url":null,"abstract":"<div><div>This paper investigates the effects of uncertainty spillovers on emerging markets. We focus on COVID-19-related news as news about global uncertainty and estimate the dynamic response of high-frequency risk measures in emerging markets. Using heteroskedasticity-based estimation and aggregate emerging market indices, we show that heightened uncertainty increases government bond and CDS spreads and decreases stock prices. Using seven emerging markets, we show that country-level risk measures respond to uncertainty consistently with aggregate measures. We argue that the results are consistent with standard consumption-based asset pricing theory.</div></div>","PeriodicalId":43998,"journal":{"name":"Central Bank Review","volume":"25 4","pages":"Article 100221"},"PeriodicalIF":1.2,"publicationDate":"2025-10-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145270595","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-10-06DOI: 10.1016/j.cbrev.2025.100220
Žaneta Vodrážka
This article examines whether the tightening of macroprudential policy induces a “substitution effect” between owner-occupied and rental housing markets, evidenced by falling housing sales price growth and rising rental price growth. Using a large sample of 39 countries and two different modeling approaches, we produce impulse response functions (IRFs) to show the response of the dependent variables to changes in three groups of macroprudential policy tools: borrower-, capital- and liquidity-based tools. The baseline models use the local projections approach and compare estimates based on data from 2000 Q1 to 2022 Q4 and from 2012 Q1 to 2022 Q4. These baseline estimates are compared to the IRFs estimated by the panel Vector Autoregression model with fixed effects. The results confirm that macroprudential policy tools, especially borrower- and capital-based, cause a substitution between owner-occupied housing and rental housing markets and that constrained credit supply can cause an excess demand in rental housing markets, increasing rental price growth. This effect is further investigated in countries with homeownership rates higher and lower than 70 %, and in countries with and without rental price control. In countries with homeownership rates lower than 70 %, the tightening of borrower- and capital-based tools decreases housing sales price growth more and increases rental price growth less than in countries with homeownership rates higher than 70 %. Lastly, the substitution effect appears to be slightly stronger in countries without rental price control than in those with it.
{"title":"The effect of macroprudential policy tools on the rental and owner-occupied housing market substitution","authors":"Žaneta Vodrážka","doi":"10.1016/j.cbrev.2025.100220","DOIUrl":"10.1016/j.cbrev.2025.100220","url":null,"abstract":"<div><div>This article examines whether the tightening of macroprudential policy induces a “substitution effect” between owner-occupied and rental housing markets, evidenced by falling housing sales price growth and rising rental price growth. Using a large sample of 39 countries and two different modeling approaches, we produce impulse response functions (IRFs) to show the response of the dependent variables to changes in three groups of macroprudential policy tools: borrower-, capital- and liquidity-based tools. The baseline models use the local projections approach and compare estimates based on data from 2000 Q1 to 2022 Q4 and from 2012 Q1 to 2022 Q4. These baseline estimates are compared to the IRFs estimated by the panel Vector Autoregression model with fixed effects. The results confirm that macroprudential policy tools, especially borrower- and capital-based, cause a substitution between owner-occupied housing and rental housing markets and that constrained credit supply can cause an excess demand in rental housing markets, increasing rental price growth. This effect is further investigated in countries with homeownership rates higher and lower than 70 %, and in countries with and without rental price control. In countries with homeownership rates lower than 70 %, the tightening of borrower- and capital-based tools decreases housing sales price growth more and increases rental price growth less than in countries with homeownership rates higher than 70 %. Lastly, the substitution effect appears to be slightly stronger in countries without rental price control than in those with it.</div></div>","PeriodicalId":43998,"journal":{"name":"Central Bank Review","volume":"25 4","pages":"Article 100220"},"PeriodicalIF":1.2,"publicationDate":"2025-10-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145229989","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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