Predicting Downside Risks to House Prices and Macro-Financial Stability

Author/Editor:

Andrea Deghi ; Mitsuru Katagiri ; Sohaib Shahid ; Nico Valckx

Publication Date:

January 17, 2020

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:

This paper predicts downside risks to future real house price growth (house-prices-at-risk or HaR) in 32 advanced and emerging market economies. Through a macro-model and predictive quantile regressions, we show that current house price overvaluation, excessive credit growth, and tighter financial conditions jointly forecast higher house-prices-at-risk up to three years ahead. House-prices-at-risk help predict future growth at-risk and financial crises. We also investigate and propose policy solutions for preventing the identified risks. We find that overall, a tightening of macroprudential policy is the most effective at curbing downside risks to house prices, whereas a loosening of conventional monetary policy reduces downside risks only in advanced economies and only in the short-term.

Series:

Working Paper No. 20/11

English

Publication Date:

January 17, 2020

ISBN/ISSN:

9781513525839/1018-5941

Stock No:

WPIEA2020011

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

47

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