Global Liquidity, House Prices and Policy Responses
51 Pages Posted: 14 Feb 2017 Last revised: 23 May 2019
Date Written: May 1, 2019
The paper investigates the impact of global liquidity on house prices around the world using a novel proxy measured by the funding availability to global banks in the main financial centers. We find supporting evidence that global conditions from the financial centers are transmitted to local banks through bank flows. Focusing on the repo markets in the US, Europe, and the UK, over the period 2000-2014 and using a panel VAR, we find that liquidity shocks impact house prices in both emerging and advanced economies. However, countries’ exposure to liquidity shocks can be mitigated by monetary policy, and by various general and house market specific macroprudential policies. We document strikingly different effectiveness of these policies in advanced and emerging markets.
Keywords: global liquidity, house prices, repos, macroprudential policies
JEL Classification: G15
Suggested Citation: Suggested Citation