Macroprudential Measures for Addressing Housing Sector Risks

Abstract

Many episodes of financial instability and crises have been associated with housing market booms followed by busts. Reinhart and Rogoff (2009) show that the six major historical episodes of banking crises in advanced economies since the mid-1970s were all associated with a housing bust. They document that this pattern can also be found in many emerging market crises, including the Asian financial crisis of 1997–98, with the magnitude of house price declines being broadly similar in both advanced and emerging market countries. Since house purchases typically involve household borrowing, house prices are likely to be strongly driven by credit conditions and household leverage.

Full publication: Macroprudential Policy