IMF Working Papers

Predicting Downside Risks to House Prices and Macro-Financial Stability

By Tobias Adrian, Andrea Deghi, Mitsuru Katagiri, Sohaib Shahid, Nico Valckx

January 17, 2020

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Format: Chicago

Tobias Adrian, Andrea Deghi, Mitsuru Katagiri, Sohaib Shahid, and Nico Valckx. Predicting Downside Risks to House Prices and Macro-Financial Stability, (USA: International Monetary Fund, 2020) accessed November 23, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper predicts downside risks to future real house price growth in 32 advanced and emerging market economies. Using 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 in turn predict future downside risks to economic growth and financial crises. We further investigate and propose policy solutions for preventing the identified risks. We find that tightening macroprudential policy is the most effective across both short and longer horizons, whereas a loosening of conventional monetary policy reduces short term downside risks only in advanced economies.

Subject: Financial markets, Financial sector policy and analysis, Money, National accounts, Prices

Keywords: Credit booms, Early Warning Models, Emerging and frontier financial markets, Financial crisis, Global, Growth at Risk, House price, House price data, House price distribution, House price imbalance, House price momentum, House price overvaluation, House price vulnerability, House Prices, House prices valuation, Housing, Housing prices, Macroprudential Policy, Misalignment ratio, Monetary policy, Monetary Policy, Overvaluation metrics, Panel Quantile Regression, Price dynamics, Real GDP, Valuation variable, WP

Publication Details

  • Pages:

    47

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2020/011

  • Stock No:

    WPIEA2020011

  • ISBN:

    9781513525839

  • ISSN:

    1018-5941

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