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House price decoupling in East Asia and the Pacific: Trilemma versus dilemma revisited

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  • Cheng, Ruijie
  • Rajan, Ramkishen S.

Abstract

This paper investigates the extent to which local property prices co-move with global property prices for selected East Asia and the Pacific (EAP) economies. Having documented the existence of house price synchronicity, the main focus of the paper is on the extent to which global financial integration in the housing markets in the EAP economies is characterized by the monetary trilemma versus dilemma proposition. The paper finds that capital controls possess effective insulating properties while exchange rate flexibility does not, offering some evidence in favor of the dilemma rather than the trilemma. The paper also finds that borrower-based macroprudential policies can reduce synchronicity when capital accounts are open.

Suggested Citation

  • Cheng, Ruijie & Rajan, Ramkishen S., 2022. "House price decoupling in East Asia and the Pacific: Trilemma versus dilemma revisited," International Review of Economics & Finance, Elsevier, vol. 79(C), pages 518-539.
    • Handle: RePEc:eee:reveco:v:79:y:2022:i:c:p:518-539
    DOI: 10.1016/j.iref.2022.02.055
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    Cited by:

    1. Marek A. Dąbrowski & Dimas Mukhlas Widiantoro, 2023. "Effectiveness and conduct of macroprudential policy in Indonesia in 2003–2020: Evidence from the structural VAR models," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 13(3), pages 703-731, December.

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    More about this item

    Keywords

    Capital controls; Exchange rate regimes; House price synchronicity; Macroprudential policies; Trilemma; Dilemma;
    All these keywords.

    JEL classification:

    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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