An Estimated DSGE Model to Analyze Housing Market Policies in Hong Kong SAR

Download or read book An Estimated DSGE Model to Analyze Housing Market Policies in Hong Kong SAR written by Mr.Pau Rabanal and published by International Monetary Fund. This book was released on 2018-04-13 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: During the last decade, Hong Kong SAR has experienced a large increase in house prices and credit, prompting the authorities to respond with several rounds of tightening macroprudential rules and increasing stamp duty taxes. This paper provides a Dynamic Stochastic General Equilibrium (DSGE) model for Hong Kong SAR and analyzes the effectiveness of these measures, and finds that they have helped reduce house price appreciation and household leverage. A baseline small open economy real business cycle model is extended by including a housing sector, financial frictions, foreign demand for the domestic housing stock, and is estimated using Bayesian methods and data for Hong Kong SAR between 1996 and 2017. The paper finds that, without these policies, house prices would have been 10.5 percent higher, and the household credit-GDP ratio 14 percent higher.