| By: |
Torsten Ehlers;
Mathias Hoffmann;
Alexander Raabe |
| Abstract: |
US net capital inflows drive the international synchronization of house price
growth. An increase (decrease) in US net capital inflows improves (tightens)
US dollar funding conditions for non-US global banks, leading them to increase
(decrease) foreign lending to third-party borrowing countries. This induces a
synchronization of lending across borrowing countries, which translates into
an international synchronization of mortgage credit growth and, ultimately,
house price growth. Importantly, this synchronization is driven by non-US
global banks’ common but heterogenous exposure to US dollar funding
conditions, not by the common exposure of borrowing countries to non-US global
banks. Our results identify a novel channel of international transmission of
US dollar funding conditions: As these conditions vary over time, borrowing
country pairs whose non-US global creditor banks are more dependent on US
dollar funding exhibit higher house price synchronization. |
| Keywords: |
House price synchronization, US dollar funding, global US dollar cycle, global imbalances, capital inflows, global banks, global banking network |
| JEL: |
F34 F36 G15 G21 |
| Date: |
2020–12 |
| URL: |
http://d.repec.org/n?u=RePEc:zur:econwp:374&r=all |