{
  "title": "Balancing Financial Stability and Housing Affordability: The Case of Canada",
  "publication": "IMF Working Papers, November 2, 2018",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2018/11/02/balancing-financial-stability-and-housing-affordability-the-case-of-canada-46299",
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  "summary": "Housing market imbalances are a key source of systemic risk and can adversely affect housing affordability. This paper utilizes a stylized model of the Canadian economy that includes policymakers with differing objectives—macroeconomic stability, financial stability, and housing affordability.",
  "sections": [
    {
      "heading": "Summary",
      "content": "- Housing market imbalances are a key source of systemic risk and can adversely affect housing affordability.\n- The paper utilizes a stylized model of the Canadian economy that includes policymakers with differing objectives—macroeconomic stability, financial stability, and housing affordability.\n- When faced with multiple objectives, deploying more policy instruments can lead to better outcomes."
    },
    {
      "heading": "Methodology",
      "content": "- Model type: stylized DSGE model of the Canadian economy.\n- Policy makers modeled with differing objectives: macroeconomic stability, financial stability, housing affordability.\n- Policy instruments evaluated include macroprudential policy and property-transfer taxes (transaction taxes)."
    },
    {
      "heading": "Key Findings",
      "content": "- Macroprudential policy can be more effective than policies based on adjusting property-transfer taxes.\n- Property-transfer tax policy entails excessive volatility in tax rates, reducing its effectiveness.\n- If property-transfer taxes are used as a policy instrument, taxes targeted at a broader set of homebuyers can be more effective than measures targeted at a smaller subset of homebuyers, such as nonresident homebuyers."
    },
    {
      "heading": "Policy Implications / Recommendations",
      "content": "- Deploy multiple policy instruments when policymakers face multiple objectives (macroeconomic stability, financial stability, housing affordability).\n- Prioritize macroprudential instruments over property-transfer tax adjustments for addressing housing market imbalances and systemic risk.\n- If transaction taxes are employed, design them to target a broader set of homebuyers rather than narrowly targeting subsets like nonresident buyers to improve effectiveness and reduce excessive rate volatility."
    },
    {
      "heading": "Subjects and Keywords",
      "content": "- Subjects: Consumption; Financial sector policy and analysis; Housing; Housing prices; Macroprudential policy; National accounts; Prices; Taxes; Transaction tax\n- Keywords: affordability concern; Canada; consumer goods; Consumption; consumption index; cost-push shock; DSGE model; Housing; housing affordability; housing market imbalance; housing preference shock; Housing prices; LTV policy; LTV ratio; Macroprudential Policy; preference shock; Transaction tax; WP\n\n---\n\n Content in this bundle\n\n- 1. Calibrated Parameter\n  - 1. Calibrated Parameter (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 1. Calibrated Parameter (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2018/11/02/balancing-financial-stability-and-housing-affordability-the-case-of-canada-46299"
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    "Authors: Troy D Matheson",
    "Published: November 2, 2018",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781484381236.001",
    "Housing market imbalances are a key source of systemic risk and can adversely affect housing affordability.",
    "The paper utilizes a stylized model of the Canadian economy that includes policymakers with differing objectives—macroeconomic stability, financial stability, and housing affordability.",
    "When faced with multiple objectives, deploying more policy instruments can lead to better outcomes.",
    "Model type: stylized DSGE model of the Canadian economy.",
    "Policy makers modeled with differing objectives: macroeconomic stability, financial stability, housing affordability.",
    "Policy instruments evaluated include macroprudential policy and property-transfer taxes (transaction taxes).",
    "Macroprudential policy can be more effective than policies based on adjusting property-transfer taxes.",
    "Property-transfer tax policy entails excessive volatility in tax rates, reducing its effectiveness.",
    "If property-transfer taxes are used as a policy instrument, taxes targeted at a broader set of homebuyers can be more effective than measures targeted at a smaller subset of homebuyers, such as nonresident homebuyers.",
    "Deploy multiple policy instruments when policymakers face multiple objectives (macroeconomic stability, financial stability, housing affordability).",
    "Prioritize macroprudential instruments over property-transfer tax adjustments for addressing housing market imbalances and systemic risk.",
    "If transaction taxes are employed, design them to target a broader set of homebuyers rather than narrowly targeting subsets like nonresident buyers to improve effectiveness and reduce excessive rate volatility.",
    "Subjects: Consumption; Financial sector policy and analysis; Housing; Housing prices; Macroprudential policy; National accounts; Prices; Taxes; Transaction tax",
    "Keywords: affordability concern; Canada; consumer goods; Consumption; consumption index; cost-push shock; DSGE model; Housing; housing affordability; housing market imbalance; housing preference shock; Housing prices; LTV policy; LTV ratio; Macroprudential Policy; preference shock; Transaction tax; WP",
    "**1. Calibrated Parameter**"
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