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Out of Sync Subnational Housing Markets and Macroprudential Policies

Author

Listed:
  • Michael Funke
  • Petar Mihaylovski
  • Adrian Wende

Abstract

In view of regional house prices drifting apart, we examine whether regionally differentiated macroprudential policies can address financial stability concerns and moderate house price differences. To this end, we disaggregate both the household sector and the housing stock in a two-region DSGE model with out of sync subnational housing markets and compare four macroprudentail policy types: standard monetary policy by means of a standard Taylor rule, leaning against the wind monetary policy, national macroprudential policy or one that targets region-specific LTV ratios. In terms of reducing variances of house prices, regionally differentiated macroprudential policy performs best, provided the policy authorities are concerned with stabilising output and house prices rather than simply minimising the variance of inflation. Thus the findings point to a critical role for policy in regionalising macroprudential tools.

Suggested Citation

  • Michael Funke & Petar Mihaylovski & Adrian Wende, 2018. "Out of Sync Subnational Housing Markets and Macroprudential Policies," CESifo Working Paper Series 6887, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_6887
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Out of Sync Subnational Housing Markets and Macroprudential Policies
      by Christian Zimmermann in NEP-DGE blog on 2018-04-10 21:56:17

    More about this item

    Keywords

    macroprudential policies; housing; DSGE; Great Britain;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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