International Spillover Effects of External Shocks on House Prices

Abstract

This paper investigates whether housing prices are affected by external shocks, including US monetary policy and global geopolitical risk shocks, dependent on country-specific vulnerabilities. We find that the responses of emerging market economies’ housing prices to both US monetary policy shocks and geopolitical risk shocks are greater in magnitude and duration than those of advanced economies. We also find that emerging market economies’ housing price responses to both shocks are much more robust in higher vulnerability states, while the responses in advanced economies depend very little on debt levels.

Keywords: US Monetary Policy Shocks, Geopolitical Risk Shocks, House Prices, Local Projection Approach