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Predicting Downside Risks to House Prices and Macro-Financial Stability

Andrea Deghi, Mitsuru Katagiri, Sohaib Shahid and Nico Valckx

No 2020/011, IMF Working Papers from International Monetary Fund

Abstract: This paper predicts downside risks to future real house price growth (house-prices-at-risk or HaR) in 32 advanced and emerging market economies. Through a macro-model and predictive quantile regressions, we show that current house price overvaluation, excessive credit growth, and tighter financial conditions jointly forecast higher house-prices-at-risk up to three years ahead. House-prices-at-risk help predict future growth at-risk and financial crises. We also investigate and propose policy solutions for preventing the identified risks. We find that overall, a tightening of macroprudential policy is the most effective at curbing downside risks to house prices, whereas a loosening of conventional monetary policy reduces downside risks only in advanced economies and only in the short-term.

Keywords: Housing prices; Housing; Macroprudential policy; Emerging and frontier financial markets; Credit booms; WP,monetary policy,house price,financial crisis,real GDP (search for similar items in EconPapers)
Pages: 47
Date: 2020-01-17
New Economics Papers: this item is included in nep-mac, nep-rmg and nep-ure
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Handle: RePEc:imf:imfwpa:2020/011