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Title: | The effects of macroprudential policy on Hong Kong’s housing market : a multivariate ordered probit-augmented vector autoregressive approach | Authors: | Chow, WW Fung, MK |
Issue Date: | Feb-2021 | Source: | Empirical economics, Feb. 2021, v. 60, no. 2, p. 633-660 | Abstract: | This study evaluates the effects of macroprudential policy on Hong Kong’s housing market using a multivariate ordered probit-augmented vector autoregressive model (MOP-VAR). The proposed MOP-VAR extends the conventional dummy policy variable approach by allowing explicit measurement of time-varying policy intensities that underlie policy rules, and thus facilitates analyses of bilateral relationship between house prices and multiple policy instruments when endogeneity exits among the instruments’ intensities and prices. An impulse response analysis suggests that the dampening effect of macroprudential tightening is stronger and more instantaneous on transactions than on prices. The eventual outcome as indicated by conditional forecasts is dominated by a strong and prolonged own price response to house price shocks and other external developments that undermine the policy’s effectiveness. Moreover, over the long haul, a combination of a stamp duty and stress test tends to be more effective than restricting the loan-to-value ratio in triggering a trend reversal in house prices, despite the government’s preference for the latter. The out-of-sample probabilistic forecasts of policy changes are mostly consistent with the observable outcomes. | Keywords: | Bayesian Hong Kong Housing market Macroprudential policy Multivariate ordered probit Vector autoregression |
Publisher: | Springer | Journal: | Empirical economics | ISSN: | 0377-7332 | EISSN: | 1435-8921 | DOI: | 10.1007/s00181-019-01765-7 | Rights: | © Springer-Verlag GmbH Germany, part of Springer Nature 2019 This version of the article has been accepted for publication, after peer review (when applicable) and is subject to Springer Nature’s AM terms of use (https://www.springernature.com/gp/open-research/policies/accepted-manuscript-terms), but is not the Version of Record and does not reflect post-acceptance improvements, or any corrections. The Version of Record is available online at: http://dx.doi.org/10.1007/s00181-019-01765-7 |
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Fung_Effects_Macroprudential_Policy.pdf | Pre-Published version | 1.31 MB | Adobe PDF | View/Open |
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