Residential concentration dampens monetary policy transmission

Abstract: This paper analyzes how the spatial structure of housing affects monetary policy transmission. I integrate spatial structure into a monetary business cycle model. Spatial structure matters economically through households' location preferences and residential externalities. These two features are reflected in two measures of residential concentration. Higher residential concentration dampens consumption responses to interest rate changes. The economic channels work through housing demand. Using geospatial data based on satellite imagery, I measure residential concentration for US and Eurozone regions. I empirically validate the modeled results in reduced form. My paper identifies residential concentration as a fundamental determinant of monetary policy transmission.

Spatial distribution of housing liquidity

Abstract: This paper examines the relationship between location, liquidity, and prices in housing markets. We construct spatial datasets for German and US cities and show that liquidity and prices decline with distance to the city center. To rationalize these results, we build a structural model with spatial search frictions. We argue that location preferences concentrate buyers in central areas, making markets tighter, more liquid, and driving up prices. Counterfactuals show that suppressing search frictions raises welfare and prices, especially in peripheral areas. Our findings highlight the importance of demand-side preferences and search frictions for understanding liquidity and asset prices.