Nico Valckx's Books

Predicting Downside Risks to House Prices and Macro-Financial Stability

By: Andrea Deghi,Mitsuru Katagiri,Mr.Sohaib Shahid,Nico Valckx

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Predicting Downside Risks to House Prices and Macro-Financial Stability

By: Andrea Deghi,Mitsuru Katagiri,Mr.Sohaib Shahid,Nico Valckx

This paper predicts downside risks to future real house price growth (house-prices-at-risk or HaR) in 32 advanced and emerging market economies. Through a macro-model and predictive quantile regressions, we show that current house price overvaluation, excessive credit growth, and tighter financial conditions jointly forecast higher house-prices-at-risk up to three years ahead. House-prices-at-risk help predict future growth at-risk and financial crises. We also investigate and propose policy solutions for preventing the identified risks. We find that overall, a tightening of macroprudential policy is the most effective at curbing downside risks to house prices, whereas a loosening of conventional monetary policy reduces downside risks only in advanced economies and only in the short-term.

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International Monetary Fund

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ISBN 10

1513525832

ISBN 13

9781513525839

Understanding the Macro-Financial Effects of Household Debt: A Global Perspective

By: Adrian Alter,Alan Xiaochen Feng,Nico Valckx

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Understanding the Macro-Financial Effects of Household Debt: A Global Perspective

By: Adrian Alter,Alan Xiaochen Feng,Nico Valckx

We confirm the negative relationship between household debt and future GDP growth documented in Mian, Sufi, and Verner (2017) for a wider set of countries over the period 1950–2016. Three mutually reinforcing mechanisms help explain this relationship. First, debt overhang impairs household consumption when negative shocks hit. Second, increases in household debt heighten the probability of future banking crises, which significantly disrupts financial intermediation. Third, crash risk may be systematically neglected due to investors’ overoptimistic expectations associated with household debt booms. In addition, several institutional factors such as flexible exchange rates, higher financial development and inclusion are found to mitigate this impact. Finally, the tradeoff between financial inclusion and stability nuances downside risks to growth.

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