The Connection Between Monetary Policy and Housing Prices: Public Perceptions and Expert Communication

Abstract

We study how the general public perceives the link between monetary policy and housing markets. Using a large-scale, cross-country survey experiment in Austria, Germany, Italy, Sweden, and the United Kingdom, we examine households’ understanding of monetary policy, their beliefs about its impact on house prices, and how these beliefs respond to expert information. We find that while most respondents grasp the basic mechanisms of conventional monetary policy and recognize the connection between interest rates and house prices, literacy regarding unconventional monetary policy is very low. Beliefs about the monetary policy–housing nexus are malleable and respond to information, particularly when it is provided by academic economists rather than central bankers. Monetary policy literacy is strongly related to education, gender, age, and experience in housing and mortgage markets. Our results highlight the central role of housing in how households interpret monetary policy and point to the importance of credible and inclusive communication strategies for effective policy transmission.