Predicting Downside Risks to House Prices and Macro-Financial Stability
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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
Format:
Paper
Pages:
47
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