Can the global financial cycle explain the episodes of exuberance in international housing markets?

Xichen Wang and Qingya Liu

Finance Research Letters, 2023, vol. 52, issue C

Abstract: This paper investigates whether the global financial cycle (GFC) contributes to the bubble-like dynamics in international house prices. Using the recursive unit-root procedure of Phillips et al. (2015a, b), we establish a timeline for the episodes of housing markets’ exuberance covering a panel of 24 countries. Next, we examine the predictive ability of the six variables characterizing the GFC as suggested by Miranda-Agrippino and Rey (2020) and find all of them robust predictors of the boom-and-bust episodes detected. These findings demand policy makers to pay close attention to the GFC indicators when monitoring explosive behaviors in house prices.

Keywords: Global financial cycle; International spillovers; Asset price bubbles; International housing markets (search for similar items in EconPapers)
JEL-codes: E44 F42 G12 R31 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:52:y:2023:i:c:s1544612322005438

DOI: 10.1016/j.frl.2022.103366

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