Monetary Policy, Housing Costs, and Tourism Pressures: Heterogeneous Transmission in Ireland’s Rental and Mortgage Markets
Monetary Policy, Housing Costs, and Tourism Pressures: Heterogeneous Transmission in Ireland’s Rental and Mortgage Markets

Summary/Abstract: This paper investigates the heterogeneous transmission of euro-area monetary tightening to housing costs and household welfare in Ireland, a small open economy characterized by a structurally tight rental market and a legacy prevalence of tracker-rate mortgages. Exploiting high-frequency monetary policy surprises and regional variation in tenure composition, we estimate local-projection impulse responses and implement a Bartik-style instrument based on pre-tightening mortgage contract structures. We document two dominant channels: a rapid rent inflation response concentrated in rental-dense urban areas, and a delayed yet persistent rise in mortgage debt-service burdens for trackerrate borrowers. We construct household-specific inflation indices and quantify welfare effects using equivalentvariation measures. Results show that low-income renters and tracker-mortgagors bear the largest welfare losses, whereas fixed-rate borrowers and outright owners remain largely insulated. Counterfactual simulations demonstrate that targeted rent and mortgage supports deliver higher welfare efficiency than broad-based price subsidies, offering novel evidence for fiscal-monetary coordination under heterogeneous exposure in housing-constrained economies.

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