Non-US global banks and dollar (co-)dependence: how housing markets became internationally synchronized

Torsten Ehlers, Mathias Hoffmann and Alexander Raabe

No 18-2020, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

Abstract: US net capital inows drive the international synchronization of house price growth. An increase (decrease) in US net capital inows improves (tightens) US dollar funding conditions for non-US global banks, leading them to increase (decrease) foreign lending to third-party borrowing countries. This induces a synchronization of lending across borrowing countries, which translates into an international synchronization of mortgage credit growth and, ultimately, house price growth. Importantly, this synchronization is driven by non-US global banks’ common but heterogenous exposure to US dollar funding conditions, not by the common exposure of borrowing countries to non-US global banks. Our results identify a novel channel of international transmission of US dollar funding conditions: As these conditions vary over time, borrowing country pairs whose non-US global creditor banks are more dependent on US dollar funding exhibit higher house price synchronization.

Keywords: house price synchronization; US dollar funding; global US dollar cycle; global imbalances; capital inows; global banks; global banking network (search for similar items in EconPapers)
JEL-codes: F34 F36 G15 G21 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2020-10-29
New Economics Papers: this item is included in nep-ifn, nep-opm and nep-ure
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Related works:
Working Paper: Non-US global banks and dollar (co-)dependence: how housing markets became internationally synchronized (2020)
Working Paper: Non-US global banks and dollar (co-)dependence: how housing markets became internationally synchronized (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:gii:giihei:heidwp18-2020

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