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

  • Kenneth N. Kuttner
  • Ilhyock Shim

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
Date of revision:
Handle: RePEc:nbr:nberwo:19723
Note: ME
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  1. Ceyla Pazarbasioglu & Gudrun Johnsen & Paul Louis Ceriel Hilbers & Inci Ötker, 2005. "Assessing and Managing Rapid Credit Growth and the Role of Supervisory and Prudential Policies," IMF Working Papers 05/151, International Monetary Fund.
  2. Crowe, Christopher & Dell’Ariccia, Giovanni & Igan, Deniz & Rabanal, Pau, 2013. "How to deal with real estate booms: Lessons from country experiences," Journal of Financial Stability, Elsevier, vol. 9(3), pages 300-319.
  3. 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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  5. 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.
  6. Ito, Takatoshi, 2010. "Monetary Policy and Financial Stability: Is Inflation Targeting Passe?," ADB Economics Working Paper Series 206, Asian Development Bank.
  7. Olivier J. Blanchard & Giovanni Dell'Ariccia & Paolo Mauro, 2010. "Rethinking Macroeconomic Policy," IMF Staff Position Notes 2010/03, International Monetary Fund.
  8. Adam S. Posen, 2006. "Why Central Banks Should Not Burst Bubbles," International Finance, Wiley Blackwell, vol. 9(1), pages 109-124, 05.
  9. Ben Bernanke & Mark Gertler, 2000. "Monetary Policy and Asset Price Volatility," NBER Working Papers 7559, National Bureau of Economic Research, Inc.
  10. Michael Woodford, 2012. "Inflation Targeting and Financial Stability," NBER Working Papers 17967, National Bureau of Economic Research, Inc.
  11. International Monetary Fund, 2012. "Credit Growth and the Effectiveness of Reserve Requirements and Other Macroprudential Instruments in Latin America," IMF Working Papers 12/142, International Monetary Fund.
  12. International Monetary Fund, 2011. "Macroprudential Policy: What Instruments and How to Use them? Lessons From Country Experiences," IMF Working Papers 11/238, International Monetary Fund.
  13. Jerome Vandenbussche & Ursula Vogel & Enrica Detragiache, 2012. "Macroprudential Policies and Housing Price: A New Database and Empirical Evidence for Central, Eastern, and Southeastern Europe," IMF Working Papers 12/303, International Monetary Fund.
  14. Ilhyock Shim & Bilyana Bogdanova & Jimmy Shek & Agne Subeltye, 2013. "Database for policy actions on housing markets," BIS Quarterly Review, Bank for International Settlements, September.
  15. 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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