The Heterogeneous Effects of Monetary Policy on Swedish House Prices: A regional study in times of differing house price growth

Abstract: This paper analyzes the impacts of monetary policy on house prices on a national and regional level in Sweden employing a structural vector autoregressive (structural VAR) model. We find that after an initial increase, real house prices turn significantly negative to bottom out at -0.5% after three quarters, and stay negative for another five quarters. On a disaggregated level we find that house prices respond heterogeneously to a monetary policy shock across regions in Sweden. While on a national level monetary policy does not seem to have a meaningful impact on house prices when distinguishing for times of booms, the regional examination uncovers a significant drop for most regions during local boom periods.