An Estimated DSGE Model to Analyze Housing Market Policies in Hong Kong SAR

Author/Editor:

Pau Rabanal

Publication Date:

April 13, 2018

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

During the last decade, Hong Kong SAR has experienced a large increase in house prices and credit, prompting the authorities to respond with several rounds of tightening macroprudential rules and increasing stamp duty taxes. This paper provides a Dynamic Stochastic General Equilibrium (DSGE) model for Hong Kong SAR and analyzes the effectiveness of these measures, and finds that they have helped reduce house price appreciation and household leverage. A baseline small open economy real business cycle model is extended by including a housing sector, financial frictions, foreign demand for the domestic housing stock, and is estimated using Bayesian methods and data for Hong Kong SAR between 1996 and 2017. The paper finds that, without these policies, house prices would have been 10.5 percent higher, and the household credit-GDP ratio 14 percent higher.

Series:

Working Paper No. 18/90

Subject:

English

Publication Date:

April 13, 2018

ISBN/ISSN:

9781484347577/1018-5941

Stock No:

WPIEA2018090

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

25

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