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The purpose of this paper is to introduce an empirical model for house price spillovers between real estate markets. The model is presented by using data from the US-UK and London-New York housing markets over a period of 1975Q1-2016Q1 by employing both static and dynamic methodologies.

The research analyzes long-run static and dynamic spillover elasticity coefficients by employing three methods, namely, autoregressive distributed lag, the fully modified ordinary least square and dynamic ordinary least squares estimator under a Kalman filter approach. The empirical method also investigates dynamic correlation between the house prices by employing the dynamic control correlation method.

The paper shows how a dynamic spillover pricing analysis can be applied between real estate markets. On the empirical side, the results show that country-level causality in housing prices is running from the USA to UK, whereas city-level causality is running from London to New York. The model outcomes suggest that real estate portfolios involving US and UK assets require a dynamic risk management approach.

One of the findings is that the dynamic conditional correlation between the US and the UK housing prices is broken during the crisis period. The paper does not discuss the reasons for that break, which requires further empirical tests by applying Markov switching regime shifts. The timing of the causality between the house prices is not empirically tested. It can be examined empirically by applying methods such as wavelets.

The authors observed a unidirectional causality from London to New York house prices, which is opposite to the aggregate country-level causality direction. This supports London’s specific power in the real estate markets. London has a leading role in the global urban economies residential housing markets and the behavior of its housing prices has a statistically significant causality impact on the house prices of New York City.

The house price co-integration observed in this research at both country and city levels should be interpreted as a continuity of real estate and financial integration in practice.

The paper is the first research which applies a dynamic spillover analysis to examine the causality between housing prices in real estate markets. It also provides a long-term empirical evidence for a dynamic causal relationship for the global housing markets.

Introducing radical changes to the methodologies for the determination of capital requirements, the final stage of the Basel III standards, which is referred to as “Basel IV” by the industry, will be a significant challenge for the global banking sector. This article reviews the main components of the new framework, analyses its ongoing implementation in the European Union and discusses its potential impact on banks, putting forward policy recommendations.

This article uses primary sources such as the publications by the Basel Committee for Banking Supervision and the European Commission. It also reviews the secondary sources, including both academic articles and analyses by various stakeholders. However, this article does not undertake any empirical analysis.

This article discusses that Basel IV will introduce strategic, operational and regulatory challenges for banks in scope. It also identifies a number of areas which are subject to further debate in the European Union such as the enhanced due diligence requirements under the new credit risk framework; governance, reporting and control rules under the operational risk framework; exemptions for certain derivative transactions under the credit valuation adjustment framework and the level of application of the capital floors within banking groups. This article concludes that the global implementation of the reforms by all jurisdictions and transposition into national banking laws concurrently with the European Union in line with the Basel Committee's implementation timeline is important from a financial stability standpoint.

The article presents an up-to-date and comprehensive review of the practical implications of Basel IV standards. It analyses the implementation of the standards in the case of the European Union, reviews the potential policy implications and presents recommendations for risk management practitioners.