McHouse prices, capital hoovering, and real exchange rate exposures
House prices are both cause and effect of the real exchange rate. In the form of implied rentals or service prices, they are a good proxy for non tradables prices, which in turn are signs of generalised expenditure inflation and hence underlying real exchange rate pressures. The causal impact is because rising house prices suck in offshore funding, markedly so in recent times, creating a capital account driven nominal exchange rate. The hoovering effect is responsive to interest rate differentials, leading to a more focused view of the role of uncovered interest parity, as an offshore response to internally generated demand for funds rather than externally generated hot money chasing spot rate margins. The overall result is likely to be chronic macroeconomic instability over the inter run, creating challenges for corporate risk management, monetary control and industrial policy.
Volume (Year): 38 (2004)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RNZP20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RNZP20|
When requesting a correction, please mention this item's handle: RePEc:taf:nzecpp:v:38:y:2004:i:1:p:119-139. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.