Real estate valuation, current account and credit growth patterns, before and after the 2008–9 crisis

Joshua Aizenman and Yothin Jinjarak

Journal of International Money and Finance, 2014, vol. 48, issue PB, 249-270

Abstract: We explore the stability of the conditioning variables accounting for the real estate valuation before and after the crisis of 2008–9, in a panel of 36 countries, recognizing the crisis break. We validate the robustness of the association between the real estate valuation and lagged current account patterns, both before and after the crisis. The most economically significant variable in accounting for real estate valuation changes turned out to be the lagged real estate valuation appreciation (real estate inflation minus CPI inflation), followed by lagged declines of the current account/GDP, lagged domestic credit/GDP growth, and lagged equity market valuation appreciation (equity market appreciation minus CPI inflation). A one standard deviation increase in lagged real estate appreciation is associated with a 10% increase in the present real estate appreciation, larger than the impact of a one standard deviation deterioration in the lagged current account/GDP (5%) and of the lagged domestic credit/GDP growth (3%). The results are supportive of both current account and credit growth channels, with the momentum channels playing the most important role. Smaller current account/GDP surpluses or larger deficits may serve as warning signals, especially when coinciding with credit expansion and real estate appreciation during the past several quarters.

Keywords: Current account; Real estate; Credit supply; Global crisis; Housing boom (search for similar items in EconPapers)
JEL-codes: F15 F21 F32 R21 R31 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

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Working Paper: Real Estate Valuation, Current Account and Credit Growth Patterns, Before and After the 2008-9 Crisis (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:48:y:2014:i:pb:p:249-270

DOI: 10.1016/j.jimonfin.2014.05.016

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