A tale of three prices: Monetary policy and autonomous consumption in the US

This paper empirically assesses the role of monetary policy, real estate prices, housing rent, and consumer prices in the determination of autonomous consumption and output. To do this, six different Structural VAR models are estimated on US quarterly data for the period 1970-2020. The estimations suggest that: i. houses’ own interest rate (which reflects the actual cost of buying a house) produces more persistent and statistically significant effects on autonomous consumption and on output than the real interest rate; ii. monetary policy transmission works through autonomous consumption, in particular via changes in housing prices; iii. autonomous consumption shocks trigger persistent and long-lasting effects on the output level. Last, when analysing separately the three price indexes considered, it is possible to observe the emergence of a price puzzle.