POLICY BRIEF: One money, many markets


  • Euro area aggregate business cycle explains a large proportion of the short-run fluctuations of its member countries.
  • Monetary policy transmission in the euro area appears to be persistently heterogeneous across member countries.
  • The degree of heterogeneity is inversely related to the degree of cross-border institutional convergence. While country-level financial variables react fairly similarly to the same monetary policy shock, variables naturally related to markets that have seen little convergence, such as housing and labour markets, react in significantly asymmetric ways.
  • Indeed, the heterogeneity found in monetary transmission into housing markets and personal consumption is correlated with differences in home ownership rates – an indicator reflecting many dimensions in which national housing markets differ from each other.

By João Duarte

View the policy brief.