Capital Inflow Shocks and House Prices: Aggregate and Regional Evidence from Korea

Peter Tillman ()
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Peter Tillman: Department of Economics, Justus-Liebig-University Giessen

No 2013-2, Working Papers from Economic Research Institute, Bank of Korea

Abstract: Over the course of the recent global financial crisis, emerging economies experienced massive swings in capital inflows. In this paper, we estimate a VAR model to assess the impact of capital inflow shocks, which are identified using a set of sign restrictions, on house prices in Korea. We base the analysis on three alternative measures of capital inflows: net total inflows, net portfolio inflows and gross total inflows. The results suggest that capital inflow shocks have a significantly positive and persistent effect on real house prices. Although shocks to capital inflows are found to be substantially more important for Korean asset markets than for other OECD countries, their overall explanatory power is modest. Using regional house price data we also show that capital inflow shocks have an asymmetric effect on property markets across the seven largest Korean cities and across different parts of Seoul.

Keywords: Capital Inflows; House prices; Monetary Policy; Sign Restrictions; VAR (search for similar items in EconPapers)
JEL-codes: E32 F32 F41 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2013-02-27
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Citations: View citations in EconPapers (6)

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http://papers.bok.or.kr/RePEc_attach/wpaper/english/wp-2013-2.pdf Working Paper, 2013 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:bok:wpaper:1302

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