House Prices and Stock Prices: Different Roles in the US Monetary Transmission Mechanism*

We analyze the role of house prices and stock prices in the monetary‐policy transmission mechanism in the US, using a structural vector autoregressive model. If we allow the interest rate and asset prices to react simultaneously to news, we find different roles for house prices and stock prices in the monetary transmission mechanism. Following a contractionary monetary‐policy shock, stock prices fall immediately, while the response in house prices is more gradual. Regarding the systematic response in monetary policy, stock prices play a more important role than house prices. As a consequence, house prices contribute more than stock prices to fluctuations in gross domestic product and inflation.