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Home, safe home: Cross-country monitoring framework for vulnerabilities in the residential real estate sector

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  • Bengtsson, Elias
  • Grothe, Magdalena
  • Lepers, Etienne

Abstract

This paper presents and assesses a framework for monitoring vulnerabilities related to the residential real estate sector, which can be easily employed for policy purposes. The framework provides intuitive and transparent early warning signals through a composite vulnerability measure, which aggregates indicators in a model-free way across three dimensions of real estate sector vulnerabilities (i.e. valuation, household indebtedness and the bank credit cycle). Our vulnerability measure proves to be a significant predictor of historical real estate crises, with a better forecasting performance than the majority of advantageously in-sample calibrated model-based measures.

Suggested Citation

  • Bengtsson, Elias & Grothe, Magdalena & Lepers, Etienne, 2020. "Home, safe home: Cross-country monitoring framework for vulnerabilities in the residential real estate sector," Journal of Banking & Finance, Elsevier, vol. 112(C).
    • Handle: RePEc:eee:jbfina:v:112:y:2020:i:c:s0378426617302935
    DOI: 10.1016/j.jbankfin.2017.12.006
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    Cited by:

    1. Lepers, Etienne & Sánchez Serrano, Antonio, 2020. "Decomposing financial (in)stability in emerging economies," Research in International Business and Finance, Elsevier, vol. 51(C).
    2. Chryso Aristidou & George Thucydides, 2022. "Historical decomposition of the Cyprus Residential Property Prices," Working Papers 2022-3, Central Bank of Cyprus.
    3. Magdalena Grothe, 2020. "Monitoring Vulnerabilities in the Residential Real Estate Sector in Poland," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 2, pages 5-24.
    4. Lukasz Mach & Dariusz Zmarzly & Ireneusz Dabrowski & Pawel Fracz, 2020. "Comparison on Subannual Seasonality of Building Construction in European Countries," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 241-257.
    5. Just Tobias & Salzberger Hannah, 2024. "Structural and Cyclical Risks in Housing Markets in OECD Countries," Intereconomics: Review of European Economic Policy, Sciendo, vol. 59(3), pages 167-175.

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    More about this item

    Keywords

    Real estate vulnerabilities; Real estate crises; Early warning models; Risk monitoring;
    All these keywords.

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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