Global Liquidity, House Prices, and the Macroeconomy: Evidence from Advanced and Emerging Economies

By A. Cesa-Bianchi, Luis Felipe Céspedes, Alessandro Rebucci. Social Science Research Network, 2015

160 citations recorded by the source corpus.

In this paper we first compare house price cycles in advanced and emerging economies using anew quarterly house price data set covering the period 1990-2012. We find that house prices in emerging economies grow faster, are more volatile, less persistent and less synchronized across countries than in advanced economies. We also find that they correlate with capital flows more closely than in advanced economies. We then condition the analysis on an exogenous change to a particular component of capital flows. We find that a global liquidity shock, identified by aggregating bank-to-bank cross border flows and by using the external instrumental variable approach of Stock and Watson (2012) and Mertens and Ravn (2013), has a much stronger impact on house prices and consumption in emerging markets than in advanced economies. In our empirical model, holding house prices or the exchange rate constant in response to this shock tends to dampen its effects on consumption in emerging economies.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/ef318ba20045012525abb7b46e7c25bc6461824c

Citations in the corpus

• International Credit Supply Shocks (2017, unknown): “(20)Cesa-Bianchi et al. (2015) used these variables as instruments for cross-border claims in a similar set up, along with US Broker-Dealers’ leverage, applying the external instrument approach of Mertens and Ravn (2013) and Stock and Watson (2012). Their optimal instrument selection procedure choos”