Housing Market Responses to Monetary Policy Shocks in Canada: Evidence from National and City Level Data

Abstract

This paper investigates the impact monetary policy shocks have on housing markets in Canada using both national and city level data. The data which includes spans the period of 1999-2016 includes house prices, housing starts and residential investment as housing market variables. This study uses a structural VAR model and a Bayesian process to generate impulse response functions for the national economy. National level monetary policy shocks identified through this process are used in projection method estimate the impact on regional housing markets of Vancouver, Calgary, Winnipeg, Toronto, Ottawa, Montreal and Halifax. The results suggest that house prices in Calgary may respond to monetary policy shocks but beyond this finding, the results fail to identify any prominent national or regional responses to monetary policy shocks.