Global Liquidity, House Prices and Policy Responses

51 Pages Posted: 14 Feb 2017 Last revised: 23 May 2019

See all articles by Chiara Banti

Chiara Banti

University of Essex

Kate Phylaktis

City University London - Sir John Cass Business School

Date Written: May 1, 2019

Abstract

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

Banti, Chiara and Phylaktis, Kate, Global Liquidity, House Prices and Policy Responses (May 1, 2019). Available at SSRN: https://ssrn.com/abstract=2916413 or http://dx.doi.org/10.2139/ssrn.2916413

Chiara Banti (Contact Author)

University of Essex ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

Kate Phylaktis

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 20 70408735 (Phone)
+44 20 70408881 (Fax)

HOME PAGE: http://www.cass.city.ac.uk/faculty/k.phylaktis/

Register to save articles to
your library

Register

Paper statistics

Downloads
92
Abstract Views
533
rank
282,072
PlumX Metrics