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Global liquidity, house prices and policy responses

Banti, C. and Phylaktis, K. (2019). Global liquidity, house prices and policy responses. Journal of Financial Stability, 43, pp. 79-96. doi: 10.1016/j.jfs.2019.05.015

Abstract

The paper investigates the impact of global liquidity on house prices around the world using a novel proxy measured by the funding availability to global banks in the main financial centers. We find supporting evidence that global conditions from the financial centers are transmitted to local banks through bank flows. Focusing on the repo markets in the US, Europe, and the UK, over the period 2000–2014 and using a panel VAR, we find that liquidity shocks impact house prices in both emerging and advanced economies. However, countries’ exposure to liquidity shocks can be mitigated by monetary policy, and by various general and house market specific macroprudential policies. We document strikingly different effectiveness of these policies in advanced and emerging markets.

Publication Type: Article
Additional Information: Crown Copyright © 2019 Published by Elsevier B.V. . Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/
Publisher Keywords: global liquidity, house prices, repos, macroprudential policies
Subjects: H Social Sciences > HG Finance
Departments: Cass Business School > Finance
URI: http://openaccess.city.ac.uk/id/eprint/22346
[img] Text - Accepted Version
This document is not freely accessible until 30 November 2019 due to copyright restrictions.
Available under License Creative Commons Attribution Non-commercial No Derivatives.

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