01861cas a2200253 a 4500 AALejournalIMF006972 230101c9999 xx r poo 0 0eng d 5.00 USD 9781455211845 1018-5941 BD-DhAAL BD-DhAAL Rabanal, Pau. The Effects of Housing Prices and Monetary Policy in a Currency Union / Pau Rabanal, Oriol Aspachs-Bracons. Washington, D.C. : International Monetary Fund, 2011. 1 online resource (52 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students The recent boom-and-bust cycle in housing prices has refreshed the debate on the drivers of housing cycles as well as the appropriate policy response. We analyze the case of Spain, where housing prices have soared since it joined the EMU. We present evidence based on a VAR model, and we calibrate a New Keynesian model of a currency area with durable goods to explain it. We find that labor market rigidities provide stronger amplification effects to all type of shocks than financial frictions do. Finally, we show that when the central bank reacts to house prices, the non-durable sector suffers an important contraction. As a result, the boom-and-bust cycle would not have been avoided if Spain had remained outside the EMU during the 1996-2007 period. Mode of access: Internet Aspachs-Bracons, Oriol. IMF Working Papers; Working Paper ; No. 2011/006 Full text available on IMF http://elibrary.imf.org/view/journals/001/2011/006/001.2011.issue-006-en.xml IMF e-Library