Predicting Downside Risks to House Prices and Macro-Financial Stability

48 Pages Posted: 10 Jun 2020

See all articles by Andrea Deghi

Andrea Deghi

International Monetary Fund (IMF)

Mitsuru Katagiri

Bank of Japan

Sohaib Shahid

International Monetary Fund (IMF)

Nico Valckx

International Monetary Fund (IMF)

Date Written: January 2020

Abstract

This paper predicts downside risks to future real house price growth (house-prices-at-risk or HaR) in 32 advanced and emerging market economies. Through a macro-model and predictive quantile regressions, we show that 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 help predict future growth at-risk and financial crises. We also investigate and propose policy solutions for preventing the identified risks. We find that overall, a tightening of macroprudential policy is the most effective at curbing downside risks to house prices, whereas a loosening of conventional monetary policy reduces downside risks only in advanced economies and only in the short-term.

Keywords: Global financial crisis, 2008-2009, Demand, Interest rate increases, Housing prices, Financial crises, House Prices, Growth at Risk, Panel Quantile Regression, Early Warning Models, Macroprudential Policy, Monetary Policy, WP, emerge market economy, quantile, house price, financial condition, policy measure

JEL Classification: C12, E17, E37, R31, E01, G21, E52, E31, G01

Suggested Citation

Deghi, Andrea and Katagiri, Mitsuru and Shahid, Sohaib and Valckx, Nico, Predicting Downside Risks to House Prices and Macro-Financial Stability (January 2020). Available at SSRN: https://ssrn.com/abstract=3623870 or http://dx.doi.org/10.2139/ssrn.3623870

Andrea Deghi (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th St NW
Washington, DC DC 20431
United States

Mitsuru Katagiri

Bank of Japan ( email )

2-1-1 Nihonbashi-Hongokucho,Chuo-ku
Tokyo
Japan

HOME PAGE: http://www.boj.or.jp/en/about/index.htm/

Sohaib Shahid

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Nico Valckx

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

HOME PAGE: http://www.imf.org

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
51
Abstract Views
227
rank
481,415
PlumX Metrics