House Price Synchronization and Financial Openness: A Dynamic Factor Model Approach
IMF Working Papers, September 28, 2018
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- House Price Synchronization and Financial Openness: A Dynamic Factor Model Approach
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Bibliographic details
- Authors: Mitsuru Katagiri
- Published: September 28, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484378243.001
Summary
- This paper investigates the developments in house price synchronization across countries by a dynamic factor model using a country- and city-level dataset, and examines what drives the synchronization.
- Empirical results indicate:
- (i) the degree of synchronization has been rising since the 1970s, and
- (ii) a large heterogeneity in the degree of synchronization exists across countries and cities.
- A panel and cross-sectional regression analysis show that the heterogeneity of synchronization is partly accounted for by the progress in financial and trade openness.
- The city-level analysis implies that the international synchronization is mainly driven by the city-level connectivity between large and international cities.
Empirical approach and data
- Methodology: dynamic factor model.
- Data: country-level and city-level house price datasets.
- Econometric analyses used: panel regressions and cross-sectional regressions.
Major findings and statistics
- Rising synchronization:
- The degree of synchronization has been rising since the 1970s.
- Heterogeneity:
- A large heterogeneity in the degree of synchronization exists across countries and cities.
- Drivers of heterogeneity:
- Progress in financial openness.
- Progress in trade openness.
- City-level driver:
- International synchronization is mainly driven by the city-level connectivity between large and international cities.
Policy-relevant implications
- Financial openness and trade openness are important correlates of cross-country heterogeneity in house price synchronization.
- City-level connectivity among large and international cities is central to international house price comovement, suggesting attention to urban linkages when assessing cross-border housing spillovers.
Subjects and keywords
- Subjects: Econometric analysis, Economic sectors, Factor models, Financial crises, Housing, Housing prices, Inflation, National accounts, Prices
- Keywords: Asia and Pacific, Dynamic factor model, Factor models, Financial openness, give house price, Global, growth in city, house price, house price synchoronization, house prices in country, house prices in the world, Housing, Housing price, Housing prices, Inflation, price data, price synchronization, South America, terms of rise, trade openness
IMF Working Paper No. 2018/209 by Mitsuru Katagiri (September 28, 2018).