Estimating the Trend of the House Price to Income Ratio in Ireland

Fang Yao
Additional contact information
Fang Yao: Central Bank of Ireland

No 8/RT/22, Research Technical Papers from Central Bank of Ireland

Abstract: Distinguishing trends and cycles in house prices is important for macroprudential policy. This paper estimates the unobserved trend and cycles of the house-price-to income ratio (HPI) using a multivariate unobserved components model, with auxiliary variables introduced for identifying both the trend and cycles. Under this approach, the HPI trend is driven by slow-moving fundamental forces, while the cyclical component of HPI is identified by using separate cyclical indicators in a VAR. I find that the estimated trend of the HPI ratio is rising over time, driven primarily by the declining natural interest rate, and to a lesser extent by credit conditions and housing imbalances. Of relevance for macroprudential policy setting, the underlying trend in HPI has risen by 8% since the introduction of borrower-based measures in 2015.

Keywords: real estate markets; macroprudential policy; systemic risk; financial crises; bubbles; financial regulation; financial stability indicators. (search for similar items in EconPapers)
JEL-codes: E5 G01 G17 G28 R39 (search for similar items in EconPapers)
Date: 2022-11
New Economics Papers: this item is included in nep-cba, nep-eec and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.centralbank.ie/docs/default-source/pub ... f?sfvrsn=3e049b1d_10 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cbi:wpaper:8/rt/22

Access Statistics for this paper

More papers in Research Technical Papers from Central Bank of Ireland Contact information at EDIRC.
Bibliographic data for series maintained by Fiona Farrelly ().