Global Financial Stability Report, April 2019: Vulnerabilities in a Maturing Credit Cycle
Global Financial Stability Report, April 10, 2019
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- Global Financial Stability Report, April 2019: Vulnerabilities in a Maturing Credit Cycle
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Bibliographic details
- Published: April 10, 2019
- Series: Global Financial Stability Report
- DOI: https://doi.org/10.5089/9781498302104.082
Executive findings
- Financial conditions remain accommodative despite significant variability over the past two quarters.
- Financial vulnerabilities have continued to build in the sovereign, corporate, and nonbank financial sectors in several systemically important countries, leading to elevated medium-term risks.
- The report focuses on corporate sector debt in advanced economies, the sovereign–financial sector nexus in the euro area, China’s financial imbalances, volatile portfolio flows to emerging markets, and downside risks to the housing market.
House prices at risk — methodology and key results
- Introduces "house prices at risk," a measure of downside risks to future house price growth using theory, insights from past analyses, and new statistical techniques.
- Empirical scope: applied to 32 advanced and emerging market economies and major cities.
- Predictors of heightened downside risks to house prices up to three years ahead:
- lower house price momentum,
- overvaluation,
- excessive credit growth,
- tighter financial conditions.
- The measure of house prices at risk:
- helps forecast downside risks to GDP growth,
- adds to early-warning models for financial crises,
- can complement other surveillance indicators of housing market vulnerabilities.
Policy implications and recommendations
- Policymakers should consider:
- clear communication of any changes in their monetary policy outlook;
- deployment and expansion of macroprudential tools;
- stepping up measures to repair public and private sector balance sheets;
- strengthening emerging market resilience to foreign portfolio outflows.
- Uses of house prices at risk for policy makers:
- guide macroprudential policy actions aimed at building buffers and reducing vulnerabilities;
- inform monetary policymakers on downside risks to the economic and inflation outlook;
- assist authorities considering measures to manage capital flows when a surge in capital inflows increases downside risks to house prices and when other policy options are limited.
Thematic focus areas covered
- Corporate sector debt in advanced economies.
- Sovereign–financial sector nexus in the euro area.
- China’s financial imbalances.
- Volatile portfolio flows to emerging markets.
- Downside risks to the housing market.
References
- https://www.imf.org/en/publications/gfsr
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