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Global liquidity, house prices and policy responses

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  • Banti, Chiara
  • Phylaktis, Kate

Abstract

The paper investigates the impact of global liquidity on house prices around the world using a novel proxy measured by the funding availability to global banks in the main financial centers. We find supporting evidence that global conditions from the financial centers are transmitted to local banks through bank flows. Focusing on the repo markets in the US, Europe, and the UK, over the period 2000–2014 and using a panel VAR, we find that liquidity shocks impact house prices in both emerging and advanced economies. However, countries’ exposure to liquidity shocks can be mitigated by monetary policy, and by various general and house market specific macroprudential policies. We document strikingly different effectiveness of these policies in advanced and emerging markets.

Suggested Citation

  • Banti, Chiara & Phylaktis, Kate, 2019. "Global liquidity, house prices and policy responses," Journal of Financial Stability, Elsevier, vol. 43(C), pages 79-96.
    • Handle: RePEc:eee:finsta:v:43:y:2019:i:c:p:79-96
    DOI: 10.1016/j.jfs.2019.05.015
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    5. Yang Zhou, 2022. "The Effects of Capital Controls on Housing Prices," Discussion Paper Series DP2022-29, Research Institute for Economics & Business Administration, Kobe University.
    6. Dimitris Anastasiou & Panayotis Kapopoulos & Kalliopi-Maria Zekente, 2023. "Sentimental Shocks and House Prices," The Journal of Real Estate Finance and Economics, Springer, vol. 67(4), pages 627-655, November.
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    More about this item

    Keywords

    Global liquidity; House prices; Repos; Macroprudential policies;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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