Macroprudential policy and real estate markets: objectives, effectiveness and new challenges

Background

Real estate risk dynamics accelerated over the course of the COVID-19 pandemic and real estate markets now appear to be the main driver of wider systemic risk dynamics in many SSM countries. As such, the role of macroprudential policy in mitigating these risks is being brought to the fore. However, risk mitigation is far from simple. Many questions remain open regarding the ultimate goal of macroprudential policy in real estate markets. For example, are policymakers taming real estate cycles or just building up the resilience of the financial system? The range of tools available to policymakers also raises questions regarding instrument selection and interaction.

Years of unprecedentedly loose monetary policy and the prospect of policy tightening also raise questions about the interaction of monetary and macroprudential policies in real estate markets. New challenges for policymakers are also coming from outside the financial system. For example, how should macroprudential policy respond to large exogenous shocks such as the one created by the COVID-19 pandemic? And what role should macroprudential policy play in tackling climate risk?

It is in this context that the ECB and the Central Bank of Malta are jointly organising the fifth annual Macroprudential Policy Group (MPPG) research workshop. The event is entitled “Macroprudential policy and real estate markets: objectives, effectiveness and new challenges” and will take place in Valletta on 21 October 2022. This workshop is a useful opportunity for policymakers, supervisors and academics to come together and share practical experience and research in the field of macroprudential policy.

Objectives

This workshop aims to foster and strengthen dialogue between policymakers and researchers, with a view to enhancing our collective understanding of how macroprudential policies function. The workshop will offer an opportunity to share and review empirical studies, state of the art models and methodological tools in the field of macroprudential policy analysis.

Potential topics include the following:

• Effectiveness and role of macroprudential policy in real estate markets

  • Effectiveness and calibration of macroprudential tools in real estate markets
  • Macroprudential instrument selection in real estate markets and instrument interactions
  • Role of macroprudential policy in real estate markets – taming the cycle or just building resilience?
  • Applying borrower-based measures beyond residential real estate markets
  • Unintended consequences of macroprudential policy in real estate markets, including inequality
  • Macroprudential policy and non-banks in real estate markets
  • Macroprudential policy and commercial real estate

• Evaluating the effects of macroprudential policy release and COVID-19 policies for real estate markets

  • Intended and unintended effects of macroprudential policy release in real estate markets
  • The role of COVID-19 pandemic policies in driving mortgage credit supply
  • The role of pre-pandemic macroprudential policy in building up resilience to the COVID-19 shock
  • Macroprudential policy’s response to large exogenous shocks
  • The role of policymaker communication and cross-border coordination

• Interaction of monetary and macroprudential policy in real estate markets

  • The role of monetary policy in driving real estate risk
  • The effects of macroprudential real estate measures on monetary policy transmission
  • Macroprudential policy’s role as a first line of defence
  • Macroprudential policy in a tightening monetary environment

• Macroprudential policy and climate change in real estate markets

  • Measuring climate risk in real estate markets and aligning it with macroprudential policy objectives
  • Policy challenges arising from climate risk uncertainty and long term horizons
  • Macroprudential policy and incentivising “green” behaviour in real estate markets
  • Macroprudential policy and climate transition risk in real estate markets

The workshop’s organisers welcome submissions from authors working for members of the European System of Central Banks (ESCB) or the Single Supervisory Mechanism (SSM), as well as academics or members of other EU/international financial institutions with a professional interest in the issues outlined above. Interested authors should send either completed draft papers (strongly preferred) or extended abstracts to workshopmacropru@ecb.europa.eu by 1 July 2022 with the email subject “MPPG workshop submission”. All submissions should be in English (in PDF format) and should include an abstract, as well as the name and email address of a nominated author who could present the paper.

Selection process and workshop attendance

The organising committee will review all submissions received by the deadline, looking at their quality, their policy relevance and the level of interest that they are likely to generate. The committee will also take the overall balance of the workshop in terms of subject matter and approaches into account. All authors will be notified by early August 2022 as to whether their papers have been accepted.

In addition to presenters and other speakers, invitations to attend the workshop are also extended to:

• members of the MPPG
• members of any department within the ESCB and the SSM that is represented in the substructures of the Financial Stability Committee working on issues related to the theme of the workshop
• employees of any EU/international financial institution (e.g. the Bank for International Settlements or the International Monetary Fund) who are working on issues related to the theme of the workshop

Space constraints may mean that organisers need to limit the number of participants from each institution (not including presenters of accepted papers and discussants).

Expenses

The travel and accommodation expenses of all attendees, presenters and discussants representing members of the ESCB or EU/international financial institutions should be covered by their own organisations. No participation fees will be charged.