International Capital Flows and House Prices: Theory and Evidence

Favilukis, Jack; Kohn, David; Ludvigson, Sydney C.; Nieuwerburgh, Stijn Van

doi:10.3386/w17751

Cited by 88 publications

(86 citation statements)

References 51 publications

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“…10 While the results corroborate the notion that macroeconomic policy explains crosscountry differences, the findings not necessarily imply that macroprudential policies such as loan-to-value (LTV) limits, which were introduced in Hong Kong and Korea, were ineffective. 11 Given the bluntness of monetary policy as an instrument to contain asset price booms (see Crowe et al (2011) for this point), the evidence presented here is consistent with the view that macroprudential measures haven not been used boldly enough to prevent bubbly house price developments.…”

Section: Cross-country Heterogeneitysupporting

confidence: 80%

“…Instead, the 10 See IMF (2011b) for a discussion of the remaining room of regional central banks to raise interest rates in light of capital inflows. 11 The empirical case for macroprudential policies in Asia such as LTV ratios and other measures is evidence is consistent with the view that differences in macro policies, e.g. monetary policy, are the source of heterogeneity across countries.…”

Section: Discussionsupporting

confidence: 58%

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Capital Inflows and Asset Prices: Evidence from Emerging Asia

Tillmann

2012

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: The withdrawal of foreign capital from emerging countries at the height of the recent financial crisis and its quick return sparked a debate about the impact of capital flow surges on asset markets. This paper addresses the response of property prices to an inflow of foreign capital. For that purpose we estimate a panel VAR on a set of Asian emerging market economies, for which the waves of inflows were particularly pronounced, and identify capital inflow shocks based on sign restrictions. Our results suggest that capital inflow shocks have a significant effect on the appreciation of house prices and equity prices. Capital inflow shocks account for -roughly -twice the portion of overall house price changes they explain in OECD countries. We also address crosscountry differences in the house price responses to shocks, which are most likely due to differences in the monetary policy response to capital inflows. Terms of use: Documents in

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Section: Cross-country Heterogeneitysupporting

confidence: 80%

Section: Discussionsupporting

confidence: 58%

Capital Inflows and Asset Prices: Evidence from Emerging Asia

Tillmann

2012

SSRN Journal

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“…A two-country two-sector model which illustrates the link between a property price boom and the current account is presented by Punzi (2012). Favilukis et al (2011) argue that capital flows play only a limited role in boom-bust cycles in property prices. Instead, they point to the reversal of financial market liberalization as a key driver.…”

Section: Related Literaturementioning

confidence: 99%

Capital inflows and asset prices: Evidence from emerging Asia

Tillmann

2013

Journal of Banking & Finance

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The withdrawal of foreign capital from emerging countries at the height of the recent financial crisis and its quick return sparked a debate about the impact of capital flow surges on asset markets. This paper addresses the response of property prices to an inflow of foreign capital. For that purpose we estimate a panel VAR on a set of Asian emerging market economies, for which the waves of inflows were particularly pronounced, and identify capital inflow shocks based on sign restrictions. Our results suggest that capital inflow shocks have a significant effect on the appreciation of house prices and equity prices. Capital inflow shocks account for -roughly -twice the portion of overall house price changes they explain in OECD countries. We also address cross-country differences in the house price responses to shocks, which are most likely due to differences in the monetary policy response to capital inflows.

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“…Previous literature shows that money supply affects the property market, and that hot money inflow, including from China, will also affect the international market, including the Hong Kong housing market [61][62][63].…”

Section: Inflation Ratementioning

confidence: 99%

Have Housing Prices Gone with the Smelly Wind? Big Data Analysis on Landfill in Hong Kong

2018

Sustainability

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Unlike many other places around the globe, Hong Kong is a small city with a high population density. Some housing units are built near the sources of an externality, such as a landfill site. As the blocks of buildings are particularly tall, many are walled buildings that block the bad odor from the landfill. Thus, the wind blowing from a landfill site may not affect the entire building estate. Some buildings are more heavily affected than others, partly because walled buildings built near landfills are rare. Only a few studies currently examine the correlation between wind direction and the prices of walled buildings. In this paper, we aim to bridge this research gap by illustrating Hong Kong as a case study. Most previous research studies only examine a few factors affecting housing prices. Modern big data is characterized by its large volume of data, which includes various types of data that analysts would not necessarily sample, but instead merely observe to track what happens. Therefore, another innovative point of our paper, is that we adopt a big data approach to study this issue. In this aspect, this paper is the first of its kind. There are 53,071 observations in the 1999 to 2014 dataset, with 2,175,911 data entries. Our results reflect that when more municipal solid waste is sent to the South East New Territories Landfill, residents' complaints in Tseung Kwan O increase. However, entire property prices in the region also increase, which rejects our hypothesis. We speculate that as more people become aware of the housing estate due to complaints, with only a limited number of housing units affected by the smell, since the wind usually only blows in certain directions, the "advertisement effect" originating from complaints about the bad smell boosts the property prices of the unaffected units. That is, people become aware of the existence of the property, visit the site, and discover that only specific units facing one particular direction are affected. Then, they purchase units that are unaffected by the smelly wind, leading to an overall increase in property prices. The study's results may provide a new perspective on urban planning, and possible implications for other cities in view of the constant increase in population and expansion of landfill sites.

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International Capital Flows and House Prices: Theory and Evidence

Cited by 88 publications

References 51 publications

Capital Inflows and Asset Prices: Evidence from Emerging Asia

Capital Inflows and Asset Prices: Evidence from Emerging Asia

Capital inflows and asset prices: Evidence from emerging Asia

Have Housing Prices Gone with the Smelly Wind? Big Data Analysis on Landfill in Hong Kong

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