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Capital inflow shocks and house prices : Aggregate and regional evidence from Korea

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  • Capital inflow shocks and house prices
  • Tillmann, Peter
  • Bank of Korea


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Title Capital inflow shocks and house prices
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Sub Title

Aggregate and regional evidence from Korea

Material Type Reports
Author(English)

Tillmann, Peter

Publisher

[Seoul, South, Korea]:Bank of Korea

Date 2013-02
Series Title; No Bank of Korea working paper / 2013-2
Pages 36
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Economy < Financial Policy
Economy < Economic Administration
Holding SSRN

Abstract

Over the course of the recent global financial crisis, emerging economies experienced massive swings in capital inflows. In this paper, we estimate a VAR model to assess the impact of capital inflow shocks, which are identified using a set of sign restrictions, on house prices in Korea. We base the analysis on three alternative measures of capital inflows: net total inflows, net portfolio inflows and gross total inflows. The results suggest that capital inflow shocks have a significantly positive and persistent effect on real house prices. Although shocks to capital inflows are found to be substantially more important for Korean asset markets than for other OECD countries, their overall explanatory power is modest. Using regional house price data we also show that capital inflow shocks have an asymmetric effect on property markets across the seven largest Korean cities and across different parts of Seoul.