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Global House Price Fluctuations: Synchronization and Determinants

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  • Hideaki Hirata
  • M. Ayhan Kose
  • Christopher Otrok
  • Marco E. Terrones

Abstract

We examine the properties of house price fluctuations across 18 advanced economies over the past 40 years. We ask two specific questions: First, how synchronized are housing cycles across these countries? Second, what are the main shocks driving movements in global house prices? To address these questions, we first estimate the global components in house prices and various macroeconomic and financial variables. We then evaluate the roles played by a variety of global shocks, including shocks to interest rates, monetary policy, productivity, credit, and uncertainty, in explaining house price fluctuations using a wide range of FAVAR models. We find that house prices are synchronized across countries, and the degree of synchronization has increased over time. Global interest rate shocks tend to have a significant negative effect on global house prices whereas global monetary policy shocks per se do not appear to have a sizeable impact. Interestingly, uncertainty shocks seem to be important in explaining fluctuations in global house prices.

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Bibliographic Info

Paper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2013-07.

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Length: 46 pages
Date of creation: Feb 2013
Date of revision:
Handle: RePEc:een:camaaa:2013-07

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Keywords: Monetary policy; interest rates; business cycles; financial cycles;

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Citations

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Cited by:
  1. Ambrogio Cesa-Bianchi & M. Hashem Pesaran & Alessandro Rebucci, 2014. "Uncertainty and Economic Activity: A Global Perspective," CESifo Working Paper Series 4736, CESifo Group Munich.
  2. Cesa-Bianchi, Ambrogio, 2013. "Housing cycles and macroeconomic fluctuations: A global perspective," Journal of International Money and Finance, Elsevier, Elsevier, vol. 37(C), pages 215-238.
  3. Bertay, A.C., 2014. "The Transmission of Real Estate Shocks Through Multinational Banks," Discussion Paper, Tilburg University, Center for Economic Research 2014-011, Tilburg University, Center for Economic Research.
  4. Sandra Eickmeier & Leonardo Gambacorta & Boris Hofmann, 2013. "Understanding Global Liquidity," BIS Working Papers 402, Bank for International Settlements.
  5. Stijn Claessens & M. Ayhan Kose, 2013. "Financial Crises Explanations, Types, and Implications," IMF Working Papers, International Monetary Fund 13/28, International Monetary Fund.
  6. Xi Chen & Michael Funke, 2013. "Renewed Momentum in the German Housing Market: Boom or Bubble?," CESifo Working Paper Series 4287, CESifo Group Munich.
  7. Ghassen El Montasser & Ahdi N. Ajmi & Tsangyao Chang & Beatrice D. Simo-Kengne & Christophe Andre & Rangan Gupta, 2013. "Cross-Country Evidence On The Causal Relationship Between Policy Uncertainty And House Prices," Working Papers, University of Pretoria, Department of Economics 201380, University of Pretoria, Department of Economics.
  8. Bernd Hayo & Britta Niehof, 2014. "Analysis of Monetary Policy Responses After Financial Market Crises in a Continuous Time New Keynesian Model," MAGKS Papers on Economics, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung) 201421, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

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