Predicting Downside Risks to House Prices and Macro-Financial Stability
IMF Working Papers, January 17, 2020
Source details
- Canonical URL
- Predicting Downside Risks to House Prices and Macro-Financial Stability
Other formats
Bibliographic details
- Authors: Tobias Adrian, Andrea Deghi, Mitsuru Katagiri, Sohaib Shahid, Nico Valckx
- Published: January 17, 2020
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513525839.001
Summary of central findings
- The paper predicts downside risks to future real house price growth in 32 advanced and emerging market economies.
- 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 predict future downside risks to economic growth and financial crises.
Methodology and evidence
- Combines a macro-model with predictive quantile regressions to estimate downside risks to house prices.
- Uses house-prices-at-risk as a metric linking house price downside scenarios to subsequent macroeconomic and financial stability outcomes.
Key empirical relationships
- House price overvaluation → higher house-prices-at-risk.
- Excessive credit growth → higher house-prices-at-risk.
- Tighter financial conditions → higher house-prices-at-risk.
- Elevated house-prices-at-risk → increased future downside risks to economic growth.
- Elevated house-prices-at-risk → higher probability of financial crises.
Policy recommendations and effectiveness
- Tightening macroprudential policy is identified as the most effective intervention across both short and longer horizons.
- Loosening conventional monetary policy reduces short term downside risks only in advanced economies.
Keywords and subject focus
- Subject: Financial markets, Financial sector policy and analysis, Money, National accounts, Prices
- Keywords include: Credit booms; Early Warning Models; Emerging and frontier financial markets; financial crisis; Global; Growth at Risk; house price; house price data; house price distribution; house price imbalance; house price momentum; house price overvaluation; house price vulnerability; House Prices; house prices valuation; Housing; Housing prices; Macroprudential Policy; misalignment ratio; monetary policy; Monetary Policy; overvaluation metrics; Panel Quantile Regression; price dynamics; real GDP; valuation variable; WP
Predicting Downside Risks to House Prices and Macro-Financial Stability, IMF Working Paper.
Content in this bundle
- Working Paper