Impact of Monetary Policy on Mortgage Rates in Russia’s Regions
https://doi.org/10.18288/1994-5124-2024-6-26-53
Abstract
Based on panel data analysis of weighted average interest rates in Russia’s regions, this paper documents differences in the responses of regional mortgage markets to changes in money market rates (in this instance, MIACR), which are influenced primarily by changes in the key rate of the Central Bank of Russia. The efficiency of monetary transmission is significantly affected by the degree of competition in regional mortgage markets. The authors propose that this may be explained by the different roles that money market instruments play as a source of liabilities for particular banks and, therefore, by variations in the amplitude of transmission of money market rates into mortgage rates. In addition, mortgage interest rates are influenced by the amount of competition in a regional mortgage market as well as by the purchasing power of borrowers in housing markets and by the quality of life in the Russian regions. This is explained via the standard microeconomic logic of market structures and the role of the PTI (the payment-to-income ratio, which indicates how much of a borrower’s income is spent on loan repayment) in determining degree of risk and ultimately the risk premium. The amount of migration into a region is also negatively correlated with mortgage interest rates.
Supporting agencies: This study has been carried out as part of the Fundamental Research Program of the National Research University Higher School of Economics
About the Authors
O. A. Demidova
National Research University Higher School of Economics
Russian Federation
Russian Federation
Olga A. Demidova - Dr. Sci. (Econ.), Cand. Sci. (Phys. and Math.), Professor.
11, Pokrovskiy bul., Moscow, 109028
A. A. Myasnikov
National Research University Higher School of Economics
Russian Federation
Russian Federation
Alexander A. Myasnikov - Cand. Sci. (Econ.), Associate Professor.
11, Pokrovskiy bul., Moscow, 109028
S. F. Seregina
University Higher School of Economics
Russian Federation
Russian Federation
Svetlana F. Seregina - Dr. Sci. (Econ.), Professor, National Research.
11, Pokrovskiy bul., Moscow, 109028
A. A. Shchankina
National Research University Higher School of Economics
Russian Federation
Russian Federation
Anna A. Shchankina - Postgraduate Student.
11, Pokrovskiy bul., Moscow, 109028
References
1. Ayvazyan S. A. Analiz kachestva i obraza zhizni naseleniya (ekonometricheskiy podkhod) [Quality of Life and Living Standards Analysis: An Econometric Approach]. Moscow, Nauka, 2012. DOI: 10.1515/9783110316254. (In Russ.)
2. Burtsev K. Rol’ ipotechnogo kreditovaniya v povyshenii kachestva zhizni naseleniya [The Role of Mortgage Lending in Improving the Population’s Quality of Life]. Vestnik Instituta ekonomiki Rossiyskoy akademii nauk [Bulletin of the Institute of Economics of the Russian Academy of Sciences], 2008, no. 1, pp. 257-266. (In Russ.)
3. Gafarova E. A. Geterogennost’ kanala refinansirovaniya ipoteki v rossiyskikh regionakh [Heterogeneity of the Mortgage Refinancing Channel in Russian Regions]. Finansy: teoriya i praktika [Finance: Theory and Practice], 2023, no. 4, pp. 184-193. DOI: 10.26794/2587-5671-2023-27-4-184-193. (In Russ.)
4. Dobrynin A. I., Ivleva E. S., Plotnikov V. A. Sotsial’no-ekonomicheskie programmy rosta ekonomiki i kachestva zhizni [Socio-Economic Programs for Economic Growth and Quality of Life]. Ekonomika i upravlenie [Economics and Management], 2006, no. 1, pp. 23-30. (In Russ.)
5. Egorov A. V., Borzykh O. A. Asimmetriya protsentnogo kanala denezhnoy transmissii v Rossii [Asymmetric Interest Rate Pass-Through in Russia]. Ekonomicheskaya politika [Economic Policy], 2018, vol. 13, no. 1, pp. 92-121. DOI: 10.18288/1994-5124-2018-1-04. (In Russ.)
6. Zozulya A. V., Zozulya P. V., Eremina T. N. Sovremennye problemy realizatsii prioritetnykh natsional’nykh proektov [Current Problems in the Implementation of National Priority Projects]. Vestnik Evraziyskoy nauki [The Eurasian Scientific Journal], 2019, vol. 11, no. 1, pp. 49-54. (In Russ.)
7. Konovalova A., Korshunov M., Nesterova M., Skuratova A., Ustinov A. Reaktsiya bankovskikh stavok na izmenenie klyuchevoy stavki Banka Rossii v usloviyakh regional’noy neodnorodnosti: analiticheskaya zapiska Banka Rossii [Reaction of Bank Rates to Changes in the Central Bank of Russia’s Key Rate Under Conditions of Regional Heterogeneity: Bank of Russia Analytical Note]. Moscow, Bank of Russia, 2021. DOI: 10.2139/ssrn.4890994. (In Russ.)
8. Kreptsev D., Seleznev S. Vliyanie stavok denezhnogo rynka na stavki po kreditam konechnym zaemshchikam [The Impact of Money Market Interest Rates on Retail Interest Rates]. Den’gi i kredit [Russian Journal of Money and Finance], 2017, no. 9, pp. 18-27. (In Russ.)
9. Moiseev S. R. Reinkarnatsiya RUONIA, ili Vtoraya zhizn’ protsentnogo indikatora [The Reincarnation of RUONIA, or the Second Life of the Percentage Indicator]. Bankovskoe delo [Banking], 2020, no. 7, pp. 20-27. (In Russ.)
10. Napalkov V., Novak A., Shulgin A. Razlichiya v effektakh edinoy denezhno-kreditnoy politike: sluchay regionov Rossii [Variations in the Effects of a Uniform Monetary Policy: The Case of Russian Regions]. Den’gi i kredit [Russian Journal of Money and Finance], 2021, vol. 80, no. 1, pp. 3-45. DOI: 10.2139/ssrn.4874584. (In Russ.)
11. Agarwal S., Amromin G., Chomsisengphet S., Landvoigt T., Piskorski T., Seru A., Yao V. Mortgage Refinancing, Consumer Spending, and Competition: Evidence From the Home Affordable Refinance Program. The Review of Economic Studies, 2023, vol. 90, no. 2, pp. 499-537. DOI: 10.1093/restud/rdac039.
12. Aiello D. J., Garmaise M. J., Natividad G. Competing for Deal Flow in Local Mortgage Markets. The Review of Corporate Finance Studies, 2023, vol. 12, no. 2, pp. 366-401. DOI: 10.1093/rcfs/cfad001.
13. Amromin G., Bhutta N., Keys B. J. Refinancing, Monetary Policy, and the Credit Cycle. Annual Review of Financial Economics, 2020, vol. 12, pp. 67-93. DOI: 10.1146/annurevfinancial-012720-120430.
14. Andrés J., Arce O. Banking Competition, Housing Prices and Macroeconomic Stability. The Economic Journal, 2012, vol. 122, no. 565, pp. 1346-1372. DOI: 10.1111/j.1468-0297.2012.02531.x.
15. Becker R., Osborn D. R., Yildirim D. A Threshold Cointegration Analysis of Interest Rate Pass-Through to UK Mortgage Rates. Economic Modelling, 2012, vol. 29, no. 6, pp. 2504-2513. DOI: 10.1016/j.econmod.2012.08.004.
16. Beraja M., Fuster A., Hurst E., Vavra J. Regional Heterogeneity and Monetary Policy. NBER, Working Paper no. w23270, 2017. DOI: 10.3386/w23270.
17. Bernanke B. Challenges in Housing and Mortgage Markets: A Speech at the Operation HOPE Global Financial Dignity Summit, Atlanta, Georgia. Washington, DC, Federal Reserve System, speech no. 650, 2012.
18. Bernanke B. Reflections on a Year in Crisis: Remarks at the Federal Reserve Bank of Kansas City’s Annual Economic Symposium, Jackson Hole, Wyoming. Washington, DC, Federal Reserve System, 2009.
19. Bernanke B. S., Gertler M. Inside the Black Box: The Credit Channel of Monetary Policy Transmission. The Journal of Economic Perspectives, 1995, vol. 9, no. 4, pp. 27-48. DOI: 10.1257/jep.9.4.27.
20. Bhutta N., Bricker J., Dettling L., Kelliher J., Laufer S. Stress Testing Household Debt. Journal of Credit Risk, 2020, vol. 16, no. 3, pp. 1-34. DOI: 10.21314/JCR.2020.268.
21. Bloze G. Interregional Migration and Housing Structure in an East European Transition Country: A View of Lithuania 2001-2008. Baltic Journal of Economics, 2009, vol. 9, no. 2, pp. 47-66. DOI: 10.1080/1406099X.2009.10840461.
22. Cassino E. Modelling New Zealand Mortgage Interest Rates. Reserve Bank of New Zealand Analytical Note Series. Wellington, Reserve Bank of New Zealand, no. AN2012/10, 2012.
23. Chong F. Housing Price, Mortgage Interest Rate and Immigration. Real Estate Management and Valuation, 2020, vol. 28, no. 3, pp. 36-44. DOI: 10.1515/remav-2020-0022.
24. Cumming F., Hubert P. House Prices, the Distribution of Household Debt and the Refinancing Channel of Monetary Policy. Economics Letters, 2022, vol. 212, no. 110280. DOI: 10.1016/j.econlet.2022.110280.
25. De Santis R. A., Surico P. Bank Lending and Monetary Transmission in the Euro Area. Economic Policy, 2013, vol. 28, no. 75, pp. 423-457. DOI: 10.1111/1468-0327.12013.
26. Di Maggio M., Kermani A., Palmer C. J. How Quantitative Easing Works: Evidence on the Refinancing Channel. Review of Economic Studies, 2020, vol. 87, no. 3, pp. 1498-1528. DOI: 10.1093/restud/rdz060.
27. Egan P., McQuinn K. Interest Rate Pass-Through in Euro Area Mortgage Markets: The Long Shadow of the Great Financial Crisis. CESifo Economic Studies, 2023, vol. 69, no. 4, pp. 234-248. DOI: 10.1093/cesifo/ifad010.
28. Eichenbaum M., Rebelo S., Wong A. State-Dependent Effects of Monetary Policy: The Refinancing Channel. American Economic Review, 2022, vol. 112, no. 3, pp. 721-761. DOI: 10.1257/aer.20191244.
29. Fang J., Li L. A Measure of China’s Housing Price Bubble from the Perspective of Dynamic House-Price-To-Income Ratio. Transactions on Economics, Business and Management Research, 2024, vol. 4, pp. 138-145. DOI: 10.62051/vqk8k856.
30. Fell J. P. C. The Role of Short Rates and Foreign Long Rates in the Determination of LongTerm Interest Rates. Frankfurt am Main, European Monetary Institute, 1996.
31. Furlanetto F., Robstad Ø. Immigration and the Macroeconomy: Some New Empirical Evidence. Review of Economic Dynamics, 2019, vol. 34, pp. 1-19. DOI: 10.1016/j.red.2019.02.006.
32. Fuster A., Hebert B., Laibson D. Natural Expectations, Macroeconomic Dynamics, and Asset Pricing. NBER Macroeconomics Annual, 2012, vol. 26, no. 1, pp. 1-48. DOI: 10.1086/663989.
33. Greenwald D. The Mortgage Credit Channel of Macroeconomic Transmission. Cambridge, MIT Sloan, Research Paper no. 5184-16, 2018. DOI: 10.2139/ssrn.2735491.
34. Gross M., Tressel T., Ding X., Tereanu E. What Drives Mortgage Default Risk in Europe and the US? International Monetary Fund, Working Paper no. 065, 2022. DOI: 10.5089/9798400205705.001.
35. Guliyeva A. Measuring Quality of Life: A System of Indicators. Economic and Political Studies, 2022, vol. 10, no. 4, pp. 476-491. DOI: 10.1080/20954816.2021.1996939.
36. Gyourko J., Tracy J. Reconciling Theory and Empirics on the Role of Unemployment in Mortgage Default. Journal of Urban Economics, 2014, vol. 80, pp. 87-96. DOI: 10.1016/j.jue.2013.10.005.
37. Holland Q. C. P., Liu B., Roca E., Salisu A. A. Mortgage Asymmetric Pricing, Cash Rate and International Funding Cost: Australian Evidence. International Review of Economics & Finance, 2020, vol. 65, pp. 46-68. DOI: 10.1016/j.iref.2019.09.009.
38. Howard G. The Migration Accelerator: Labor Mobility, Housing, and Demand. American Economic Journal: Macroeconomics, 2020, vol. 12, no. 4, pp. 147-179. DOI: 10.1257/mac.20180363.
39. Hussein Z. Q., Al-Marzouk K. H., Mahmood E. A. The Impact of Bank Credit on Investment and Public Spending in Iraq for the Period (2005-2021). International Journal of Professional Business Review, 2022, vol. 7, no. 6, pp. 2. DOI: 10.26668/businessreview/2022.v7i6.e871.
40. Im K. S., Pesaran M. H., Shin Y. Testing for Unit Roots in Heterogeneous Panels. Journal of Econometrics, 2003, vol. 115, no. 1, pp. 53-74. DOI: 10.1016/S0304-4076(03)00092-7.
41. Jiang E. X. Financing Competitors: Shadow Banks’ Funding and Mortgage Market Competition. The Review of Financial Studies, 2023, vol. 36, no. 10, pp. 3861-3905. DOI: 10.1093/rfs/hhad031.
42. Kao C. Spurious Regression and Residual-Based Tests for Cointegration in Panel Data. Journal of Econometrics, 1999, vol. 90, no. 1, pp. 1-44. DOI: 10.1016/S0304-4076(98)00023-2.
43. Kasar K. S., Karaman E. Life in Lockdown: Social Isolation, Loneliness and Quality of Life in the Elderly During the COVID-19 Pandemic: A Scoping Review. Geriatric Nursing, 2021, vol. 42, no. 5, pp. 1222-1229. DOI: 10.1016/j.gerinurse.2021.03.010.
44. Keys B. J., Piskorski T., Seru A., Yao V. Mortgage Rates, Household Balance Sheets, and the Real Economy. Columbia Business School, Research Paper no. 14-53, 2014. DOI: 10.2139/ssrn.2505691.
45. Leroy A., Lucotte Y. Heterogeneous Monetary Transmission Process in the Eurozone: Does Banking Competition Matter? International Economics, 2015, vol. 141, pp. 115-134. DOI: 0.1016/j.inteco.2015.01.006.
46. Leung C. K. Y., Tang E. C. H. The Dynamics of the House Price‐To‐Income Ratio: Theory and Evidence. Contemporary Economic Policy, 2023, vol. 41, no. 1, pp. 61-78. DOI: 10.1111/coep.12538.
47. Levrero E. S., Deleidi M. The Causal Relationship Between Shortand Long-Term Interest Rates: An Empirical Assessment of the United States. MPRA, Paper no. 93608, 2019.
48. Liu X., Yu J., Cheong T. S., Wojewodzki M. The Future Evolution of Housing Price-toIncome Ratio in 171 Chinese Cities. Annals of Economics & Finance, 2022, vol. 23, no. 1, pp. 159-196.
49. Malliaris S., Rettl D. A., Singh R. Is Competition a Cure for Confusion? Evidence From the Residential Mortgage Market. Real Estate Economics, 2022, vol. 50, no. 1, pp. 206-246. DOI: 10.1111/1540-6229.12340.
50. Mian A. R., Straub L., Sufi A. What Explains the Decline in r*? Rising Income Inequality Versus Demographic Shifts. University of Chicago, Becker Friedman Institute for Economics, Working Paper no. 2021-104, 2021. DOI: 0.2139/ssrn.3916345.
51. Mouratidis K. Urban Planning and Quality of Life: A Review of Pathways Linking the Built Environment to Subjective Well-Being. Cities, 2021, vol. 115, no. 103229. DOI: 10.1016/j.cities.2021.103229.
52. O’Toole C., Slaymaker R. Repayment Capacity, Debt Service Ratios and Mortgage Default: An Exploration in Crisis and Non-crisis Periods. Journal of Banking & Finance, 2021, vol. 133, no. 106271. DOI: 10.1016/j.jbankfin.2021.106271.
53. Payne J. E. The Response of the Conventional Mortgage Rate to the Federal Funds Rate: Symmetric or Asymmetric Adjustment? Applied Financial Economics Letters, 2006, vol. 2, no. 5, pp. 279-284. DOI: 10.1080/17446540600647037.
54. Rendon S., Bazer K. Individual and Local Effects of Unemployment on Mortgage Defaults. Federal Reserve Bank of Philadelphia, 2021. DOI: 10.21799/frbp.wp.2021.39.
55. Roley V. V., Sellon G. H. Monetary Policy Actions and Long-Term Interest Rates. Federal Reserve Bank of Kansas City Economic Quarterly, 1995, vol. 80, no. 4, pp. 77-89.
56. Scharfstein D., Sunderam A. Market Power in Mortgage Lending and the Transmission of Monetary Policy. Harvard University, Working Paper, 2016.
57. Valadkhani A., Anwar S. Interest Rate Pass‐Through and the Asymmetric Relationship Between the Cash Rate and the Mortgage Rate. Economic Record, 2012, vol. 88, no. 282, pp. 341-350. DOI: 10.1111/j.1475-4932.2012.00823.x.
58. Van Leuvensteijn M., Sørensen C. K., Bikker J. A., Van Rixtel A. A. Impact of Bank Competition on the Interest Rate Pass-Through in the Euro Area. Applied Economics, 2013, vol. 45, no. 11, pp. 1359-1380. DOI: 10.1080/00036846.2011.617697.
59. Wong A. Refinancing and the Transmission of Monetary Policy to Consumption. Princeton University, Working Papers, March, 2021.
60. Xu P., Han Y., Yang J. US Monetary Policy Surprises and Mortgage Rates. Real Estate Economics, 2012, vol. 40, no. 3, pp. 461-507. DOI: 10.1111/j.1540-6229.2011.00325.x.
61. Yang J., Shao H. Impact of Bank Competition on the Bank Lending Channel of Monetary Transmission: Evidence From China. International Review of Economics & Finance, 2016, vol. 43, pp. 468-481. DOI: 10.1016/j.iref.2015.12.008.
Review
For citations:
Demidova O.A., Myasnikov A.A., Seregina S.F., Shchankina A.A. Impact of Monetary Policy on Mortgage Rates in Russia’s Regions. Economic Policy. 2024;19(6):26-53. (In Russ.) https://doi.org/10.18288/1994-5124-2024-6-26-53
Views:
535
Email this article 