House Prices and the Macroeconomy: Implications for Banking and Price Stability

Hardcover | January 21, 2007

byCharles Goodhart, Boris Hofmann

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House price bubbles, and their aftermath, have become a focus of macro-economic policy concern in most developed countries. This book elucidates the two-way relationship between house-price fluctuations and economic fundamentals. Housing has many features which make it distinct from otherassets, like equity. Real estate is not only an asset but also a durable consumption good for households, providing shelter and other housing services. As a result, a house is often the largest and most important asset of households and therefore accounts for a major share of household wealth.Similarly a large share of bank assets is tied to housing values. House price fluctuations may, therefore, have a major effect on economic activity and the soundness of the financial system. Following an introductory chapter, the book is structured into three parts. The first demonstrates the importance of house prices as determinants or indicators of inflation and economic activity. The second focuses on the inter-relationships between bank credit extension and housing prices, and howbubbles can lead to financial crises. The third discusses resultant public policy issues, such as whether, and how, to include housing prices in a general inflation index, and how to restrain the housing/bank credit cycle.

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House price bubbles, and their aftermath, have become a focus of macro-economic policy concern in most developed countries. This book elucidates the two-way relationship between house-price fluctuations and economic fundamentals. Housing has many features which make it distinct from otherassets, like equity. Real estate is not only a...

Charles Goodhart, CBE, FBA is the Norman Sosnow Professor of Banking and Finance at the London School of Economics and is Programme Director of the Financial Markets Group. Before joining the London School of Economics in 1985, he worked at the Bank of England for seventeen years as a monetary adviser, becoming a Chief Adviser in 1980...

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Format:HardcoverDimensions:246 pages, 9.69 × 6.73 × 1.18 inPublished:January 21, 2007Publisher:Oxford University PressLanguage:English

The following ISBNs are associated with this title:

ISBN - 10:0199204594

ISBN - 13:9780199204595

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Table of Contents

Introduction1. House Prices and the Macroeconomy: An OverviewHouse Prices and Economic Activity2. House Prices as Predictors of Consumer Price Inflation3. Financial Conditions Indices4. The Phillips Curve, the IS Curve, and Monetary Transmission5. Goods and Asset Price DeflationsHouse Prices and Financial Stability6. House Prices and Bank Credit7. Bank Regulation and Macroeconomic Fluctuations8. Default, Credit, and Asset PricesImplications of House Price Fluctuations for Public Policy9. What Role for House Prices in the Measurement of Inflation?10. A Second Central Bank Instrument?11. House Price Fluctuations and Public Policy