Predicting Downside Risks to House Prices and Macro-Financial Stability

Download or read book Predicting Downside Risks to House Prices and Macro-Financial Stability written by Andrea Deghi and published by International Monetary Fund. This book was released on 2020-01-17 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.