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IMF Working Paper: Household Debt and House Prices-at-risk: A Tale of Two Countries
February 28, 2020--Summary:
To identify and quantify downside risks to housing markets, we apply the house price-at-risk methodology to a sample of 37 cities across the United States and Canada using quarterly data from 1983 to 2018. This paper finds that downside risks to housing markets in the United States have seemingly fallen over the past decade, while having increased in Canada.
Supply-side drivers, valuation, household debt, and financial conditions jointly play a key role in forecasting house price risks. In addition, capital flows are found to be significantly associated with future downside risks to major housing markets, but the net effect depends on the type of flows and varies across cities and forecast horizons. Using micro-level data, we identify households vulnerable to potential housing shocks and assess the riskiness of household debt.
view the IMF Working Paper: Household Debt and House Prices-at-risk: A Tale of Two Countries
Private investors in trading surge as coronavirus sparks market correction
February 28, 2020--As world markets take a turn for the worse, investors use ETFs as they hope to profit from any bounceback
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OECD GDP growth slows to 0.2% in the fourth quarter of 2019
February 20, 2020--Growth of real gross domestic product (GDP) in the OECD area slowed to 0.2% in the fourth quarter of 2019, compared with 0.4% in the previous quarter, according to provisional estimates. Among the Major Seven economies with data available for the fourth quarter of 2019, only the United States saw GDP increase (up 0.5%, unchanged from the previous quarter).
GDP contracted sharply in Japan (by minus 1.6%, following October’s increase in consumption tax) and also contracted in Italy (by minus 0.3%) and France (by minus 0.1%).
GDP growth slowed to zero in the United Kingdom and Germany (following growth of 0.5% and 0.2% respectively in the previous quarter) and also slowed in the euro area and in the European Union (to 0.1%, from 0.3% in the previous quarter).
OECD-Corporate bond debt continues to pile up
February 18, 2020--The volume of corporate debt reached an all time high in real terms of USD 13.5 trillion at the end of 2019, driven by the return of more expansionary monetary policies early in the year. At the same time, the overall quality of corporate debt has declined, according to a new OECD report
Corporate Bond Market Trends, Emerging Risks and Monetary Policy says that non-financial companies borrowed USD 2.1 trillion in the form of corporate bonds in 2019. However, the data show that, in comparison to previous credit cycles, today's stock of outstanding corporate bonds has lower overall credit quality, higher payback requirements, longer maturities and inferior investor protection. This may amplify the negative effects that an economic downturn would have on the non-financial corporate sector and the overall economy.
Finding Solid Footing for the Global Economy
February 19, 2020--As the Group of Twenty industrialized and emerging market economies (G-20) finance ministers and central bank governors gather in Riyadh this week, they face an uncertain economic landscape.
After disappointing growth in 2019, we began to see signs of stabilization and risk reduction, including the Phase 1 U.S.-China trade deal. In January, the IMF projected growth to strengthen from 2.9 percent in 2019 to 3.3 percent in 2020 and 3.4 percent in 2021.
This projected uptick in growth is dependent on improved performance in some emerging market and developing economies.
Monetary and fiscal policy have been doing their part. In fact, monetary easing added approximately 0.5 percentage points to global growth last year. Forty-nine central banks cut rates 71 times as part of the most synchronized monetary action since the global financial crisis.
BIS-No global real estate market despite higher price synchronisation and growing role of international investors, central banks find
February 18, 2020--Although residential and commercial real estate prices are increasingly moving in sync and the role of international investors is growing, this does not mean that there is a global real estate market, a report by the Committee on the Global Financial System finds.
Property price dynamics: domestic and international drivers documents recent trends in residential and commercial property prices in over 20 countries, gives an overview of key drivers of price developments and describes policy initiatives used to manage associated risks to the economy and financial stability.
Property prices have been rising, reaching record highs in many countries. As prices appear high in comparison to simple rule-of-thumb valuation benchmarks, such as rents and incomes, some central banks are concerned about the consequences of a potential correction. In many cases, however, current price developments can be largely explained by fundamental drivers such as interest rates and income, the report finds.
Bassanese Bites: Bubble trouble
February 17, 2020--Top events of the past week
Global stocks continued to shrug off coronavirus fears last week with the S&P 500 up a lazy 1.6% to reach a new record high. Reports of a possible peak in the number of new coronavirus cases was the main (positive) market development, notwithstanding a surge in reported cases in China-due to an apparent change in reporting methods.
At this stage global markets are still attempting to "look through" the viruses' hit to global growth-as it's still only likely to be short-term-though this could change if the (still relatively small) number of cases outside of China begins to rise.
Also noteworthy late last week was more Washington talk of a US "middle class tax cut" plus a proposed plan to encourage everyday American's to invest in the surging stock market. This could be just the talk Wall Street could latch onto to support a further rally this year, especially if looks like Trump will win in a canter.
World Gold Council-The relevance of gold as a strategic asset
February 12, 2020--Gold benefits from diverse sources of demand: as an investment, a reserve asset, a luxury good and a technology component. It is highly liquid, no one's liability, carries no credit risk, and is scarce, historically preserving its value over time.
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IOSCO publishes key considerations for regulating crypto-asset trading platforms
February 12, 2020--The Board of the International Organization of Securities Commissions today published a report that describes the issues and risks associated with crypto-asset trading platforms (CTPs) and sets out key considerations to assist regulatory authorities in addressing these issues.
The development of crypto-assets is an important area of interest for regulatory authorities around the world and has been identified in the IOSCO work program as an on-going Board priority in 2020.
The report published today, titled Issues, Risks and Regulatory Considerations Relating to Crypto-Asset Trading Platforms, describes the issues that IOSCO has identified regarding CTPs. The report sets out key considerations intended to assist regulatory authorities in evaluating CTPs within the context of their regulatory frameworks.
Construction Activity Can Signal When Credit Booms Go Wrong
February 12, 2020--No global real estate market despite higher price synchronisation and growing role of international investors, central banks find.
In Spain, private sector credit as a share of GDP almost doubled between 2000 and 2007. This increase was accompanied by a boom in housing prices-which doubled in real terms over the same period. The economy as a whole also grew at a record pace.
But then in 2008, Spain's credit bubble burst, and with it came loan defaults, bank failures, and a prolonged economic slowdown.
A less-noticed development in Spain was in the construction sector, where employment grew by an astounding 47 percent, compared to the economy-wide increase of 27 percent.
view the IMF Staff Discussion Note-Discerning Good from Bad Credit Booms:The Role of Construction
