This paper develops and estimates a monetary business cycle model with nominal loans and collateral constraints tied to housing values. The model shows that demand shocks move together with housing and nominal prices, and are amplified over time. The financial accelerator is not uniform: nominal debt dampens supply shocks, stabilizing the economy under interest rate control. Structural estimation supports two key model features: collateral effects significantly improve the response of aggregate demand to house price shocks; nominal debt improves the sluggish response of output to inflation surprises. The paper also evaluates the role of house prices and debt indexation in affecting monetary policy trade-offs. The model's transmission mechanism works as follows: a positive demand shock increases consumer and asset prices, allowing borrowers to spend and invest more, and reducing the real value of their debt obligations, positively affecting their net worth. This amplifies the demand shock but dampens supply shocks, as adverse supply shocks benefit borrowers' net worth if obligations are held in nominal terms. The model successfully explains key business cycle facts and the interaction between asset prices and economic activity. It also provides insights into policy questions, such as the negligible gains from allowing the monetary authority to respond to asset prices and the improved output-inflation variance trade-off from nominal debt.This paper develops and estimates a monetary business cycle model with nominal loans and collateral constraints tied to housing values. The model shows that demand shocks move together with housing and nominal prices, and are amplified over time. The financial accelerator is not uniform: nominal debt dampens supply shocks, stabilizing the economy under interest rate control. Structural estimation supports two key model features: collateral effects significantly improve the response of aggregate demand to house price shocks; nominal debt improves the sluggish response of output to inflation surprises. The paper also evaluates the role of house prices and debt indexation in affecting monetary policy trade-offs. The model's transmission mechanism works as follows: a positive demand shock increases consumer and asset prices, allowing borrowers to spend and invest more, and reducing the real value of their debt obligations, positively affecting their net worth. This amplifies the demand shock but dampens supply shocks, as adverse supply shocks benefit borrowers' net worth if obligations are held in nominal terms. The model successfully explains key business cycle facts and the interaction between asset prices and economic activity. It also provides insights into policy questions, such as the negligible gains from allowing the monetary authority to respond to asset prices and the improved output-inflation variance trade-off from nominal debt.