International House Price Cycles, Monetary Policy and Risk Premiums

Gregory Bauer

Staff Working Papers from Bank of Canada

Abstract: Using a panel logit framework, the paper provides an estimate of the likelihood of a house price correction in 18 OECD countries. The analysis shows that a simple measure of the degree of house price overvaluation contains a lot of information about subsequent price reversals. Corrections are typically triggered by a sharp tightening in the monetary policy interest rate relative to a baseline level in each country. Two different assessments of the current and future baseline estimates of monetary policy interest rates are provided: a simple Taylor rule and one extracted from a term structure model. A case study based on the Canadian housing market is presented.

Keywords: Econometric and statistical methods; Housing (search for similar items in EconPapers)
JEL-codes: C2 E43 R21 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2014
New Economics Papers: this item is included in nep-mac, nep-mon and nep-ure
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Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:14-54

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