The European Central Bank (ECB) is constrained, as its monetary policy tools appear insufficient to deal with the housing price boom, warns John Mulebauer, a professor at Oxford University in Real Estate Booms and Collapses.: Implications for Monetary and Macroprudential Policy in Europe”, Released within the scope of the European Central Bank Forum which continues this Wednesday in Sintra.
The study concludes that the ECB has little room to “go against the tide”, due to the heterogeneous environment among the 19 member states, and therefore calls for a change in the models applied by the Monetary Policy Council led by President Christine Lagarde.
For the specialist, there is a direct relationship between the mechanisms of monetary policy transmission and the purchase and rental prices of real estate, a phenomenon that, in turn, shows signs of the economic health of the country.
The document stressed that financial crises are often preceded by an easing of lending standards and the consequent increase in lending, as well as an increase in loans accompanied by an increase in real estate prices.
At the epicenter of the housing crisis is a banking crisis. “There is an important link between credit terms and non-performing loans (bad loans, i.e. non-performing loans). Non-performing loans are important components of credit cycles. [e consequentemente] in banking crises,” explains John Mullbauer.
Non-performing loans are a problem for banks for several reasons. On the one hand, the institution that granted the loan may lose part or all of the money lent to it and no longer have the expected gains from collecting interest and commissions.
“This is a good ‘paper’, it is necessary to know how to calibrate monetary policy in moments of calm and moments of turmoil. [para o mercado]Giovanni del Arixia commented, during the forum.
The deputy director of the “Research” department at the International Monetary Fund also insisted on distinguishing between what he classified as a “good” and “bad” real estate boom, pointing to a “good criterion” of employment growth or slowdown in various sectors. . , from construction to “utilities” between these two phenomena.
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