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.
Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2020/011