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Mr. Francisco Roch
Colombian house prices have increased significantly between 2005 and 2016. This paper estimates the extent of misalignments in house prices relative to fundamentals and evaluates the overall risk to the economy from the housing sector. The results suggest a moderate house price misalignment relative to fundamentals which is, however, mitigated by housing finance characteristics.
Mr. Francisco Roch

relative to fundamentals are estimated using an error-correction model, relating short-term changes in house prices to a long-term equilibrium relationship, interest rates, and to changes in income per capita and credit growth. We find some degree of house price misalignment relative to fundamentals which is, however, mitigated by housing finance characteristics. The model results suggest that house prices are around 13 percent above equilibrium. Nevertheless, after the financial crisis of 1999, the authorities have addressed possible mortgage financing vulnerabilities

International Monetary Fund. Asia and Pacific Dept

vulnerabilities, including rising corporate debt, house price misalignments and sovereign-banking sector links in some EU countries, domestically rising financial risks arise from higher household and corporate leverage . This chapter examines current domestic and global macro and financial conditions and links them to a distribution of possible financial condition outcomes in Korea. An important advantage of this approach is that it allows an assessment as to whether slower domestic growth/higher household leverage and/or a tightening in global financial conditions is net

International Monetary Fund. Asia and Pacific Dept
This Selected Issues paper seeks to assess how this transformation has affected its growth potential. Employing a range of methodologies, the analysis concludes that Vietnam’s medium-term growth potential has increased from 6.2 percent estimated in 2014 to 6.5 percent. Acceleration of reforms that have generated productivity gains in the last decade, including the implementation of agreed free trade agreements, could further boost growth potential. The four methodologies provide a range of estimates for Vietnam’s potential output. On balance, we assess the potential growth estimate in Vietnam to be at 6.5 percent in 2017, higher than previous staff estimates of 6.2. The output gap is estimated at 0.4 percent in 2017. This analysis will be extended further in a forthcoming paper. The production function estimates can be further improved by explicitly incorporating the effect of structural transformation due to labor reallocation into the model, and by better accounting for the impact of the quality of human capital accumulation by taking the quality of education into account. Improvements in data quality, for example, on real estate prices, quarterly gross domestic product, unemployment rate and labor force in the informal sector, and capacity utilization, could further enhance the analysis.
International Monetary Fund. European Dept.

full deductibility of interest payment on mortgages and lower effective tax rates. Lower risk weights of residential mortgages - Risk weights of residential mortgages tend to be much lower than corporate loans, creating incentives for banks to lend more to households than to companies to improve their risk weighted capital ratio. Housing Completions and Population Growth Sources: Norges Bank and IMF staff calculations. 6. Various factors may affect the estimates of house price misalignment . For example, the price-to-rent ratio is often used to

International Monetary Fund. European Dept.
This Selected Issues paper examines the vulnerability of firms in Malta and investigates the effect of their balance sheets on investment in innovation. The results indicate that, while the financial health of medium and large firms has improved in recent years, vulnerabilities remain in the construction sector and for small and medium enterprises. Firms with weaker balance sheets tend to invest less in innovation, even during good times. Policy implications call for (1) accelerating the restructuring of corporate balance sheets of highly leveraged but viable firms, (2) improving the insolvency framework to allow a fast exit of nonviable companies, and (3) expanding corporate funding options for small and medium enterprises, including via nonbank financing alternatives.