in the literature, there are different channels through which housing affects the economy : first, housing wealth constitutes a significant portion of total wealth of households in the advanced economies. for instance, housing wealth accounted for about one - half of household net worth in the us and over two - thirds in the euro area. hence, any variation in it may have significant impact on households ’ consumption and thereby aggregate demand in the economy. second, housing markets have implications for the supply side of the economy as labour mobility and employment is affected by the housing economy. third, house prices, like any other asset prices being interest rate sensitive, affect transmission of monetary policy. finally, boom and bust in house prices have implications for business cycles and hence financial stability. historically, sharp increases in house prices have been followed by sharp declines after the price bubble bursts. reinhart and rogoff ( 2009 ) show that the six major historical episodes of banking crises in the advanced economies since the mid - 1970s were all associated with a bis central bankers ’ speeches housing bust. 1 in the decade preceding the sub - prime crisis, not only did the house price increased substantially, it was also more synchronous across the advanced economies ( chart 1 ). thus, sharp increases in house prices over a prolonged period are often predictive of crises in the future. moreover, the run - up in property prices was also associated with large expansion in credit leading to a substantial increase in household debt. according to the international monetary fund ( imf ), in the advanced economies, the ratio of household debt to income rose by an average of 39 percentage points to 138 per cent during the 5 - year period preceding 2007. 2 cecchetti ( 2012 ) 3 argues that booms in the prices of assets used as collateral create procyclicality and property price booms tend to be much worse than equity price booms. the institutional structure for housing finance and the role of government differ across countries. it is argued that the key determinants of market depth of housing finance in advanced economies are greater acceptability of housing as collateral and well defined legal rights of borrowers and lenders. the mortgage loans are typically long - term, 20 – 30 years. but, mortgage interest rates in most cases tend to be linked to short term rates with the provision for periodic resets. there are exceptions, however, such as the us, where longterm fixed - rate mortgage even for 30 years is available. loan to value ratios (

of inflation coming back and growth slowing down do remain. the headwinds from geopolitical conflicts, geoeconomic fragmentation, commodity price volatility and climate change continue to blow. 4. during this entire period of great volatility, maintaining price and financial stability have posed difficult trade - offs, as evident – among others – from the banking sector turmoil in certain advanced economies in 2023. the challenge is always between doing too little or too late on the one hand ; and doing 3 chapter 2, world economic outlook, imf, october 2024. too much or too early on the other. reading the interplay between monetary policy actions and the developments in the financial sector as well as the evolving situation correctly, and timing the decisions are always challenging. central banks have by and large performed well this time around. 5. in this challenging global environment, let me highlight certain contradictions globally which we observe at the current juncture. first, government bond yields are rising even as many advanced economies have embarked on an easing path through rate cuts, underscoring the fact that treasury markets are influenced by a host of global and domestic factors that are much beyond mere policy adjustments. incidentally, even the us dollar is appreciating although the fed is cutting rates. second, undeterred by the strong us dollar and higher bond yields, prices of gold and oil - the two commodities that typically move in tandem - are showing sharp divergence. third, an interesting contrast is also emerging between rising geopolitical risks and financial market volatility. while geopolitical tensions have escalated steadily in recent years, financial markets have shown considerable resilience in the face of mounting uncertainties. fourth, global trade is projected to remain higher than the previous year 4 notwithstanding the sanctions, tariffs, import duties, rising cross - border restrictions and supply chain disruptions. fifth, the emerging market economies ( emes ) have shown greater resilience than advanced economies ( aes ) in the current phase. indian context 6. amidst these headwinds and contradictions, the indian economy is sailing through smoothly, powered by buffers like strong macro - economic fundamentals, stable financial system and resilient external sector. our endeavour has been to seize every opportunity to further strengthen our fundamentals through prudent and proactive policy approach. our prime focus has 4 world merchandise trade volume is projected to grow by 2. 7 per cent in 2024 and 3 per cent in 2025 as