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Can Non-Interest Rate Policies Stabilize Housing Markets? Evidence from a Panel of 57 Economies

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  • Kenneth N. Kuttner
  • Ilhyock Shim

Abstract

Using data from 57 countries spanning more than three decades, this paper investigates the effectiveness of nine non-interest rate policy tools, including macroprudential measures, in stabilizing house prices and housing credit. In conventional panel regressions, housing credit growth is significantly affected by changes in the maximum debt-service-to-income (DSTI) ratio, the maximum loan-to-value ratio, limits on exposure to the housing sector and housing-related taxes. But only the DSTI ratio limit has a significant effect on housing credit growth when we use mean group and panel event study methods. Among the policies considered, a change in housing-related taxes is the only policy tool with a discernible impact on house price appreciation.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19723.

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Date of creation: Dec 2013
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Handle: RePEc:nbr:nberwo:19723

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  1. Svensson, Lars E.O., 2010. "Inflation Targeting," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 22, pages 1237-1302 Elsevier.
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  3. Adam S. Posen, 2006. "Why Central Banks Should Not Burst Bubbles," Working Paper Series WP06-1, Peterson Institute for International Economics.
  4. Ilhyock Shim & Bilyana Bogdanova & Jimmy Shek & Agne Subeltye, 2013. "Database for policy actions on housing markets," BIS Quarterly Review, Bank for International Settlements, September.
  5. International Monetary Fund, 2011. "Macroprudential Policy," IMF Working Papers 11/238, International Monetary Fund.
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  7. Michael Woodford, 2012. "Inflation Targeting and Financial Stability," NBER Working Papers 17967, National Bureau of Economic Research, Inc.
  8. Giovanni Dell'Ariccia & Olivier J. Blanchard & Paolo Mauro, 2010. "Rethinking Macroeconomic Policy," IMF Staff Position Notes 2010/03, International Monetary Fund.
  9. Claessens, Stijn & Ghosh, Swati R. & Mihet, Roxana, 2013. "Macro-prudential policies to mitigate financial system vulnerabilities," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 153-185.
  10. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
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  14. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
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Cited by:
  1. Christoph Basten & Cathérine Koch, 2014. "The causal effect of house prices on mortgage demand and mortgage supply," ECON - Working Papers 140, Department of Economics - University of Zurich.
  2. Joshua Aizenman & Yothin Jinjarak, 2013. "Real Estate Valuation, Current Account and Credit Growth Patterns, Before and After the 2008-9 Crisis," NBER Working Papers 19190, National Bureau of Economic Research, Inc.

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