Himanshu
Joshi* Devoted to the analysis of housing market in India,
the paper employs a special decomposition scheme for the structural VAR
proposed by Blanchard and Quah (1989) to study the impact of permanent shocks
to housing prices attributed to monetary variables and income growth - and, in
the process, attempts to identify speculative price bubbles in
the housing market. Based on the monthly data, the empirical evidence obtained
in the paper suggests that the housing market in India at present
remains fairly well equilibrated if seen in terms of the proximity of the actual
housing prices and the estimated long run equilibrium housing prices. This implies
that the risk of speculation in the market is not yet materially significant.
However, as a mark of caution, since the empirical results indicate that housing
prices are significantly much more sensitive to permanent interest rate shocks
than shocks to credit growth, the stance of monetary policy particularly
that reflected by the setting of the policy rate appears to be the single most
important arbiter of the future growth of the housing market. Needless to mention,
it is therefore necessary to take this factor into due account while developing
policy approaches in relation to the housing sector. Besides, as income growth
explains quite little about variations in housing prices, the possibility of some
adverse selection in overall bank financing of the housing sector cannot be completely
ruled out. JEL Classification : E58, R31
Keywords : Structural
VAR, decomposition, forecast error variance, asset prices, permanent shocks.
Introduction The rapid growth of the housing
market in India in the recent years has raised concerns about its sustainability
and implications for financial and macroeconomic stability. In the history of
economic development, housing price bubbles have been recorded and studied with
great interest. With the hindsight of documented experience, the bursting of asset
bubbles in the housing market has often been associated with severe economic crises,
especially, recessions caused by sharp reduction in spending as a result of loss
in the consumers’ power to leverage against capital gains. International
Monetary Fund (IMF) research reported in the World Economic Outlook (April, 2003)
indicated that output losses after house-price crashes in developed countries
have, on average, been twice as large as those after stock market crashes, usually
resulting in lasting recessions. The pace of housing sector growth can be gauged
by the fact that the total value of residential property in developed economies
increased by an estimated US $ 20 trillion to over US$ 60 trillion in the last
three years which is even higher than the increase in global share values (Vedpuriswar,
2005). The surge in value of the stock of housing supported by an equally strong
upturn in prices has led analysts to wonder if this boom is really sustainable
or is merely a large financial bubble ready to burst. The recent surge in housing
prices globally has gone hand-in-hand with a much larger jump in household debt
than in previous booms. It is understood that not only that new buyers engaged
bigger mortgages, but even existing owners increased their mortgages to turn capital
gains into cash thereby causing a rally in housing prices. Although the
surge in the housing market in India is relatively a recent phenomenon, the rapid
growth in bank financing in this sector requires attention in the light of the
experience in other countries. The paper is divided into five sections. Sections
I and II provide a review of international experience and the development of the
Indian housing market, respectively. Section III discusses data and methodology.
Sections IV and V include empirical evidence and concluding observations,
respectively. Section I
Housing Markets: An International Perspective In
a recently released review of the housing market, OECD Economic Outlook No.78
(2005) offers a detailed analysis of recent house price developments in the OECD
countries in the backdrop of the experience of the past 35 years and in the context
of the role of fundamentals. The OECD Outlook mentions that of the 37 large
upturn phases between 1970 and the mid-1990s, 24 ended in downturns in which anywhere
from one-third to well over 100 per cent of the previous real term gains were
wiped out. This, in turn, had negative implications for activity, particularly
consumption. It also observed that the current upswing in OECD countries
is more generalised than in the past with a combination of factors, such as, low
interest rates coupled with development of new and innovative financial products
playing an important role. In regard to fundamental determinants of housing prices,
while price-to-income ratio is considered a ready measure of affordability, it
is by itself not a reliable measure since the cost of carrying mortgages varies
over time. An assessment of a more useful measure namely, the debt servicing ratio
for the OECD countries indicates that the general increase in indebtedness has
been mostly offset by the decline in borrowing rates, and with the exception of
Australia, the Netherlands and New Zealand, households do not seem to devote greater
share of their income to debt service than in the recent past. According to the
OECD Economic Outlook another approach to evaluating housing prices is based on
asset pricing which uses measures, such as, price-to-rent ratio and user
cost of housing. Taking these two measures, the review reports that housing prices
in the UK, Ireland, the Netherlands, Spain, Australia and Norway were considered
overvalued while those in France, Canada, Denmark, Sweden, Finland, Italy
and New Zealand were not significantly overvalued. Housing prices are also
impacted by other factors such as supply conditions, demographic changes and speculative
pressures. Furthermore, housing cycles can influence economic activity through
wealth effects on consumption and private residential investment due to changes
in the profitability and the impact on employment and demand in property related
sectors. Shocks to housing prices also have implications for financial stability
as financial institutions with large exposures in the housing sector could find
themselves with inadequate cushions to absorb the losses leading to deterioration
in overall credit delivery. In regard to policy implications, views differ on
how the monetary authorities should respond to housing price developments. The
choice between using regulatory/tax actions or monetary policy actions is contextual
but useful so long as the measures are appropriately designed with reference
to the size of the actual shock. In the United States economy, which is
at present experiencing a strong cycle in the housing market, prices in certain
regions have risen sharply if measured against the yardstick of affordability
calculated as the ratio of housing prices to annual income reflecting a build
up of the asset bubble. In fact, at present, the median price of new house in
the US is almost five times the median household income. More importantly, even
as housing prices have risen, the rental values have remained subdued suggesting
presence of speculative forces. Thus, with the rise in house prices relative
to rental rates, the house price/rental ratio in the US moved above its long run
average, suggesting that house prices were indeed high relative to rents (Krainer,
2003). The strong upsurge in the housing market in the US is a source of concern,
especially, for the global financial stability should the market suffer a sharp
downturn. In the context of the present conditions in the global housing
markets where the mortgage financing rates have fallen significantly since the
last few decades, the IMF has cautioned that, just as the upswing in house prices
has been an international phenomenon, so any downturn is likely to be synchronised,
causing widespread effects. Section II
Development of Housing Market in India : A Review
In a country with a vast population, the problem of providing shelter to all has
been an issue of great concern to the civil society and the governments
of various times. It has, therefore, generally been subsumed that state intervention
is necessary to meet the housing requirements of the vulnerable sections and to
create an enabling environment to achieve the providing of shelter for all on
a self-sustainable basis. Concrete governmental initiatives began in the early
1950s as a part of the First Five Year Plan (1951-56) with a focus on institution-building
and housing for weaker sections of society. In the subsequent five year plans,
government action ranged from strengthening the provision of housing for the poor
and the introduction of several schemes for housing in the rural and urban regions
of the country. During the early years of housing development in India, initiatives
were taken mostly by the government, and it is only in the recent years
that private construction activity has made significant contributions mainly in
urban or semi- urban regions in the area of housing/real estate development. It
may be mentioned that the current surge in housing demand is generally limited
to large urban metropolitan regions, although smaller towns near these centers
have also seen some good growth alongside. In the history of housing development,
the Second Five Year Plan (1956-61) saw the enactment of legislations for
orderly town and country planning including the setting up of relevant organisations
and for the preparation of master plans for important towns. In 1959 the central
government announced a scheme to offer assistance in the form of loans to state
governments for a period of 10 years for acquisition and development of land in
order to make available building sites in sufficient numbers. During this period
master plans for major cities were also prepared. The Third Plan (1961-66)
led to the coordination of various programmes to help housing for low-income groups.
The Fourth Plan (1969-74) took a pragmatic view on the need to prevent the growth
of population in large cities and decongestion and dispersal of population through
the creation of smaller townships. The Housing & Urban Development Corporation
(HUDCO) was established to fund housing and urban development programmes. A scheme
for improvement of infrastructure was also undertaken to provide basic amenities
in cities across the country. In order to reduce the pressure of urbanisation
the Fifth Plan (1974-79) yet again reiterated the policy of promoting smaller
towns in new urban centres, while emphasising on the improvement of civic amenities
in urban and metropolitan regions. The Urban Land (Ceiling & Regulation) Act
was enacted to prevent concentration of land holdings in urban areas and to make
urban land available for construction of houses for the middle- and low-income
groups. The Sixth Plan (1980-85) refocused attention on the provision of services
along with shelter, particularly for the poor. The programme of Integrated Development
of Small and Medium Towns was launched in small towns for development of roads,
pavements, minor civic works, bus-stands, markets, shopping complexes, etc.
Positive incentives were offered for setting up new industries and commercial
and professional hubs in small, medium and intermediate towns. The
Seventh Plan (1985-90) made a marked departure in the focus given to the government-led
housing development stressing on the need to place major responsibility of housing
construction to the private sector. To augment the flow of institutional finance
to the housing sector and promoting and regulating housing finance institutions,
the National Housing Bank (NHB) was set under the aegis of the Reserve Bank of
India in 1988. The Seventh Plan clearly also recognised the problems of the urban
poor and for the first time an Urban Poverty Alleviation Scheme known as Urban
Basic Services for the Poor (UBSP) was introduced. This was also the period when
private builders were offered incentives to participate and contribute in building
mass housing projects. The Eighth Plan (1992-97), for the first time,
recognised the role and importance of the urban sector for the national economy.
The Plan identified the key issues in the emerging urban areas, viz.,
the widening gap between demand and supply of infrastructural services, the increased
growth of urban population and deterioration of city environments. The new
Housing and Habitat Policy unveiled in 1998 aimed at ensuring “shelter for
all” and better quality of life to all citizens by using the unused
potential in public, private and household sectors. The key objective of the policy
was on creating strong public–private partnership for tackling the housing.
Under the new policy, government proposed to offer fiscal concessions, carry out
legal and regulatory reforms and create an enabling environment for the development
of the housing sector. The policy emphasised the role of the private sector, as
the other partner, to be encouraged to take up the land assembly, housing construction
and invest in infrastructure facilities. Ever since the added emphasis
was given to private initiative in housing development, there has been a rapid
growth in private investment in housing with the emergence of real estate developers
mainly in metropolitan centres and other fast growing townships. The growth has
been fuelled by rising business opportunities in new and emerging enterprises,
increasing income levels, low interest rates, employment generation and demographic
changes. However, even as significant changes in laws, regulations have encouraged
housing development, policy analysts believe that further reforms
such as tax/stamp duty rationalisation that provide a level playing field to the
housing sector may need to be carried forward to tap the unmet demand for housing
stock. In the recent years for example, the scrapping of the Urban Land (Ceiling
& Regulation) Act by the central government, amendment of the NHB Act to provide
for easy foreclosure and permission for foreign direct investment to make
investments in real estate have provided an encouraging investment climate. An
Advisory Board with professionals has also been constituted to advice the government
on matters relating to the development of the housing sector. In any case,
introduction of measures mentioned above, the easing of monetary policy stance
and the priority given to the housing sector in RBI’s credit policies and
the recent Union Budgets have all provided incentives to both financial institutions
and buyers of residential property. Housing market in India, as evidenced
by the growth in bank exposures to the sector took off mainly since the year 2001.
For example, the retail loan portfolios of banks including housing and real estate
advances expanded at rates ranging between 22-41 per cent since 2001-02
and accounted for 26.7 per cent of the incremental non-food credit in 2005-06.
As per the RBI’s Annual Policy Statement for the year 2006-07, the incremental
growth in the loans to commercial real estate and housing clocked rates of 84.4
per cent and 29.1 per cent, respectively, in 2005-06. The rapid growth
in housing loan market has been supported, inter alia, by the growth
in the middle class population, favourable demographic structure, rising job opportunities
in the metropolitan centres, emergence of a number of second tier cities as upcoming
business centres, IT and ITES related boom and rise in disposable incomes.
Furthermore, attractive tax advantages for housing loans make them ideal vehicles
for tax planning for salary earners. The real estate market has also grown rapidly
recording an annual price appreciation in excess of 10 per cent or more depending
on regional importance. The real estate market has been boosted by the proposal
to permit 100 per cent FDI in the sector. For banks and other housing finance
institutions, the regulatory framework enabled expansion in house loan portfolios
given the helpful prescriptions on risk weights for housing exposures and the
benefit of compliance with the targets mandated for priority sector lending. Besides,
housing loans growth by financial institutions has been assisted by the comfort
of relative safety of such assets given the tangible nature of the primary security
and the comfort obtained from the SARFAESI Act, 2002. As
alluded to earlier, one of the most significant factor that drove
the growth of housing market in India in the recent years was the easy availability
of bank finance at affordable interest rates owing to surplus liquidity
with the banking sector coupled with the softening of interest rate
environment on the back of lower inflationary expectations. It may be mentioned
that the reductions in interest rates in the housing market have been far more
noteworthy as has been the case of in respect of other retail and corporate
advances because of low risk perception and favorable fiscal and regulatory dispensations.
Concerns regarding the sustainability of increasing growth in housing and
other retail financing by financial institutions now appear to be arising given
the increasing load of household debt as reflelected by the wide gap between borrowings
and repayments as reported by the latest round of decade-wise NSSO survey. The
situation calls for caution on the dangers of building up of systemic credit risk
and the instability of the financial system as a whole. The sharp growth
in the housing and the real estate markets has nevertheless been of concern to
policy makers especially in the context of its implications for macroeconomic
and financial stability in the event of a sudden downturn. Being a recent phenomenon,
the recorded history of financial markets in India has so far not experienced
the pangs caused by bursting of bubbles in the housing sector, although
the need to take pre-emptive policy actions can hardly be overemphasised in the
light of the experience in other countries. It may be mentioned that as a part
of calibrated policy response, the Reserve Bank has been gradually nudging financial
institutions to exercise due diligence in the assessment of credit risks for exposures
in the housing sector, while increasing the regulatory risk weights/ provisioning
for housing and real estate loans. As a preemptive measure the Reserve Bank in
its Annual Policy Statement for the year 2006-07 increased general provisioning
for residential housing beyond Rs 20 lakh and commercial real estate from 0.40
per cent to 1.0 per cent. The risk weight on bank exposure to commercial real
estate has also been increased from 125 per cent to 150 per cent. While
all round development of the housing sector is a welcome objective, it is also
important to take note of the pace of the cyclical growth in recognition of the
risks of build up of asset price bubbles. Of the several factors that contribute
to the occurrence of bubbles, high credit growth backed by low interest rates
is considered equally more important. It may, therefore, be useful to have some
empirical analysis devoted to the assessment of the current conditions in the
housing market from the point of view of developing policy choices in regard to
the housing market. The empirical research on housing market in India is
scarce due to the paucity of information. With the objective of filling the void,
this paper attempts a technical analysis of housing price bubbles in India - particularly
aiming at separating the real from speculative price elements by focusing on the
relevant monetary aggregates that have a bearing on the growth of the housing
market. There are a number of factors which appear to be important for the growth
of housing market consisting of income growth, mix of monetary policy, tax and
regulatory incentives and procedural ease of loan disbursals, etc. The
speculative factors, on the other hand, may depend on the hype built around advertising,
asymmetric information and speculative or herd behavior causing prices to rise
to unsustainable levels and beyond that determined by relevant factors mentioned
above. Although it is difficult to identify a house price bubble which occurs
due to a deviation of market price from the fundamental value of the house, a
number of eclectic approaches for identification have been used. Section
III Data and Empirical Methodology
Although the housing sector of the economy has received considerable attention
in the recent years given its core importance in the developmental goals of the
Indian economy, its significance in sustaining financial stability has been recognised
rather recently following the significant credit growth at low rates of interest
in the recent past. The data in respect of aggregate credit disbursed to the housing
sector and national price index for housing output is not easily available on
monthly frequency at which data is used in this study for the period from April
2001 to June 2005. As a result, this study is based on data which may be
considered good proxies although this might be considered as an extent of limitation.
However, given the fact that housing credit has formed a dominant share
of overall non-food growth in the recent years, the actual annual growth in housing
credit can be expected to be highly correlated with that of growth in non food
credit which can be considered a good measure of the former. In fact the
choice of proxy for housing credit is also supported by the fact that for the
time sample under consideration, the correlation coefficient between available
annual outstanding housing credit and non food credit is quite high. The price
of housing is represented by the index of housing prices for major metropolitan
centres compiled and provided by a bank. Although the price index for metropolitan
centres does not capture the country wide pricing conditions, the index nevertheless
provides a good guide to price developments since most of the price increase in
housing output in the recent years has been observed in metropolitan regions.
As for interest rate on housing finance, the weighted average call money rate
is taken as the proxy for interest rate on housing loans as the lack of information
on higher frequency weighted lending rate on housing loans limits the use of such
data. It may, however, be pointed out that among all other sector specific interest
rates, the movement in the interest rates on housing loans whether fixed or floating
have been by and large synchronous with the short term money market rate in the
recent years, as evidenced by the reduction of interest rate on housing loans
for a 20-year tenure from a high of 13-14 per cent per annum in 2000 to about
7-8 per cent in 2006 following the progressive reduction in RBI’s
policy interest rate. Finally, it is also necessary to include the income
variable in the system for assessing the impact on housing prices. The income
variable is taken as the annual growth rate in real GDP. The experimental
design is based on deflating all nominal variables by the rate of inflation based
on wholesale price index (1993-94=100) in order to have the system defined fully
in real terms. The interpretation of the structural VAR considered
here is made in terms of four shocks, viz., interest rate (εint),
non food credit (εnfoodcredit), GDP growth (εgdpgrowth)
and housing prices (εhsgprice) shocks related to system equations
for changes in interest rate, housing credit, GDP growth and housing prices. The
analytical results from this experimental design would, therefore, throw light
on how the housing market could be affected by the monetary conditions, especially,
given the prevailing high growth in credit accompanied by low interest rates as
well as GDP or income growth. The specification is also meaningful as the increase
in housing prices are observed to have been noticed mainly in select metropolitan
centres and other urban regions where borrowers have easier access to bank credit
and those who gain relatively more from a rise in economic growth. The algebraic
form of the VAR model is based on the representation proposed by Blanchard and
Quah (1989) which enables the characterisation and study of the impact of permanent
shocks with respect to each of the variables included in the model.
Including stationary variables in the structural VAR, and ordering the vector
as ,
the model is as follows (1) where
K(L) is the vector of reduced where K(L) is of a finite order and where et
form independent white noise errors corresponding to the individual equations
in the structural VAR with a covariance matrix .
Assuming that the orthogonal structural shocks (εt below) can
be written as linear et=Ro εt where
Ro is combinations of the structural errors (1) especially, et et a
non singular matrix. The moving average representation (MAR) of system (1) containing
the original residuals then can be written down terms in the orthogonal disturbances
with each of the et normalised to have unit variance zt
= R(L) εt (2) where K(L)Ro
= R(L) and for positive definite matrix .
Equation (2) forms the basis for obtaining Blanchard and Quah decomposition. In
particular if Ro is identified then the MA representation can be directly
derived from (2). However, since Ro is a four by four matrix, a total
of ten restrictions are required for identification. Since
and var( ε t ) are normalised to unit variance, matrix Ro
six additional restrictions for identification which can be obtained by imposing
restrictions on the long run multipliers in the matrix R(L). Each component of
the long run matrix R(L) namely Rij(1) represents the corresponding
dynamic long run multiplier (or the permanent component) which would need to be
subjected to economically meaningful restrictions for identification. The
following restrictions needed for the identification of R(L) matrix are
placed on the long run multipliers to identify the structural shocks, viz.,
interest rate, nonfood credit, GDP and housing price shocks.
(a) policy interest rate shock is the only shock that can itself have a long run
effect on the interest rate. (b) in the long run credit conditions will be
determined by supply conditions, namely, aggregate credit supply and interest
rate. (c) GDP growth is affected by permanent shocks attributed to itself,
interest rate and credit growth, presuming in the monetarist tradition, that easy
credit availability in a low interest rate environment played a crucial role in
stimulating economic activity in the recent years. (d) and finally, housing
prices are affected in the long run by permanent shocks in interest rate, credit
and GDP shocks and own innovations in housing prices. With
these identifying restrictions on the permanent effects, the long run matrix R(L)
appears as follows
From the above, it is straightforward to recover Ro as both K(1) and
are known. As R(1) is lower
triangular, it is also a unique Choleski factor of the long run representation
R(1)R(1). The
structural VAR is also used for obtaining forecast error variance decompositions
alongside a measure of the real equilibrium housing price index which is exhibited
in the form of a graph. Measure of misalignment is computed by comparing the actual
housing price index with the estimated trajectory for the housing price index
obtained from the model. Section IV
Empirical Evidence Table (I) presents
the forecast error variance decompositions for housing prices. According to Table
I, the majority of the explanation for the forecast error variance of housing
prices is explained by interest rate, implying that the interest rate conditions
have a significant role to play in determining housing prices. The impact
of non food credit is lesser than interest rate but taken together credit growth
and interest rate explain almost 72.3 percent of the forecast error variance of
annual change in housing prices. Table I : Forecast Error
Variance Decomposition of Housing Prices (per cent, average for 12 months)
Accounted
for by Interest Rate | Accounted
for by Non Food Credit | Accounted
for by Housing Prices themselves | Accounted
for by GDP | 45.51 | 26.81 | 17.84 | 7.59 |
However as mentioned earlier, from the point of view of the
analysis, the objective of this paper is to distinguish between the real and speculative
price increases in the housing market. From expression (3), it is straight forward
to estimate the fundamental or long term equilibrium housing prices given the
monetary fundamentals especially, interest rate and credit growth which are taken
as the explanatory variables in the model and GDP growth which captures changes
in income. Chart 1 depicts the relative positioning of actual (flagged ‘HOUSING’
in the graph) and long run equilibrium housing price (flagged ‘BQESTHSG’)
indices. From Chart 1 it is noted that because of the close proximity of
the actual and equilibrium housing price indices, there is only a very a small
extent of misalignment.
Section V Concluding
Observations The empirical findings recorded in
the study support the inference that amongst the various factors that have
a bearing on housing prices, monetary conditions, viz., interest
rate and credit growth play a critical role. Together they explain a very large
part of the forecast error variance of housing prices and can be considered as
primary drivers of growth. It is, however, somewhat alarming to find that real
income growth played only a minor role in determining housing prices, reflecting
an extent of adverse selection in overall bank financing. Another notable
factor is the low order of persistence of housing prices in India as borne out
by the little explanation offered in the model by own innovations in housing prices.
This finding is in contrast to the stylised feature of housing markets in other
parts of the world where housing prices display strong persistence because of
the time taken in clearing the market in the aftermath of a shock. Lower persistence
implies that the risk of relatively quicker reversal in housing prices in the
event of a shock cannot be completely ruled out. The results
of forecast error variance decompositions also indicate that housing prices
are significantly much more sensitive to interest rate changes than
credit supply. Therefore, as advised by Bernanke (2002), there is a need to carefully
evaluate the consequences of monetary policy actions especially when the housing
market is seized by price bubbles, since a pre-emptive hike in interest
rates (over and above what is judged necessary for overall price stability purposes),
may well be counterproductive. Moreover a tighter policy to prick a housing bubble
(if one could be safely identified) could also be potentially damaging for
other sectors. In the recent period, as the graphical analysis
shows, the long run equilibrium housing prices are observed to closely trail the
actual level of prices implying that the extent of misalignment between the actual
and long run equilibrium housing prices has remained low during the period under
consideration. This means that the extent of speculation in the market is subdued,
and the market is primarily supported by the existing configuration of monetary
variables, viz., lower interest rates and easy availability of credit.
Taken together the key implication of the these findings is that
monetary policy is expected to exert a significant impact on the housing
market as monetary conditions undergo changes either in the form of a rise in
interest rates or a reduction in supply of credit. Since the variance decompositions
show that changing monetary conditions especially interest rate, have particularly
large impact on housing prices, it is necessary that measured policy adjustments
are taken to avoid adverse effects on the balance sheet of banks, particularly
of those having large exposures to the housing/real estate
sector. The empirical inference in regard to the role of
monetary policy is also consistent with the international evidence as reported
in the IMF’s World Economic Outlook (2003) suggesting that housing price
bursts during the late 1970s and the early 1980s actually followed the tightening
of monetary policy which was aimed at reducing inflation. It, therefore, appears
that sectoral measures in the regulatory domain that help in soft landing,
such as, for example, withdrawing or reducing regulatory accommodation may be
more worthwhile than direct measures taken for demand compression. According to
the OECD’s Economic Outlook, while the monetary authorities can have many
choices to respond to asset price developments including housing prices, the policy
response to housing prices should be related only to the extent that they contain
information about future output growth and inflation, and that, if desired, it
would be more appropriate to use alternative policy instruments (taxes and regulations)
to stabilise housing cycles. On the future prospects of housing market,
it may be considered that while the market has been working close to its potential
as elicited from the convergence of the actual housing prices and long term equilibrium
prices during the time sample under consideration, its performance nevertheless
would continue to be tightly governed by monetary conditions defined predominantly
in terms of configuration of interest rates and ease/ tightness of credit
supply. References Bernanke, B.(2002), “Asset-Price
Bubbles and Monetary Policy”, Remarks before the New York Chapter of the
National Association for Business Economics, October, New York. Blanchard,
O. and D. Quah (1989), “The Dynamic Effects of Aggregate Demand and
Supply Disturbances”, American Economic Review 79, 655-673
International Monetary Fund (IMF) (2003), “Growth and Institutions”,
World Economic Outlook, April. Krainer, J (2003), “House
Price Bubbles”, Federal Reserve Bank of San Fransisco (FRBSF) Economic
Letter, Number 2003-06, March. Organisation for Economic Co-operation
and Development (OECD) (2005), “Recent House Price Developments: The Role
of Fundamentals”, OECD Economic Outlook, No. 78, Preliminary Edition.
Government of India, Five Year Plan Documents, Planning Commission.
Reserve Bank of India (2006), “Annual Policy Statement for the Year
2006-07”, April. Vedpuriswar, A.V(2005)., “Globally, Housing
Set for a Crash !”, ICFAI, Hyderabad. * Director, Monetary
Policy Department, Reserve Bank of India. The views expressed in the
paper are based on empirical findings and are strictly personal and not
those of the Reserve Bank of India. The usual disclaimer applies. |