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Macroeconomic determinants of international housing markets

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  • Adams, Zeno
  • Füss, Roland

Abstract

This paper examines the long-term impact and short-term dynamics of macroeconomic variables on international housing prices. Since adequate housing market data are generally not available and usually of low frequency we apply a panel cointegration analysis consisting of 15 countries over a period of 30 years. Pooling the observations allows us to overcome the data restrictions which researchers face when testing long-term relationships among single real estate time series. This study does not only confirm results from previous studies, but also allows for a comparison of single country estimations in an integrated equilibrium framework. The empirical results indicate house prices to increase in the long-run by 0.6% in response to a 1% increase in economic activity while construction costs and the long-term interest rate show average long-term effects of approximately 0.6% and -0.3%, respectively. Contrary to current literature our estimates suggest only about 16% adjustment per year. Thus the time to full recovery may be much slower than previously stated, so that deviations from the long-term equilibrium result in a dynamic adjustment process that may take up to 14 years.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Housing Economics.

Volume (Year): 19 (2010)
Issue (Month): 1 (March)
Pages: 38-50

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Handle: RePEc:eee:jhouse:v:19:y:2010:i:1:p:38-50

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Web page: http://www.elsevier.com/locate/inca/622881

Related research

Keywords: Housing market Macroeconomy Panel cointegration Dynamic OLS Dynamic adjustment process;

References

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Citations

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Cited by:
  1. Agnello, Luca & Schuknecht, Ludger, 2009. "Booms and busts in housing markets: determinants and implications," Working Paper Series 1071, European Central Bank.
  2. Nneji, Ogonna & Brooks, Chris & Ward, Charles W.R., 2013. "House price dynamics and their reaction to macroeconomic changes," Economic Modelling, Elsevier, vol. 32(C), pages 172-178.
  3. Hassan Fereidouni Gholipour, 2013. "The effect of foreign real estate investments on house prices: evidence from emerging economies," International Journal of Strategic Property Management, Taylor & Francis Journals, vol. 17(1), pages 32-43, March.
  4. Beatrice D. Simo-Kengne & Rangan Gupta & Goodness C. Aye, 2013. "Macro Shocks And House Prices In South Africa," Working Papers 201302, University of Pretoria, Department of Economics.
  5. Christian Pierdzioch, 2012. "Macroeconomic Factors and the German Real Estate Market: A Stock-Market-Based Forecasting Experiment," Review of Economics & Finance, Better Advances Press, Canada, vol. 2, pages 87-96, May.
  6. Katrakilidis, Constantinos & Trachanas, Emmanouil, 2012. "What drives housing price dynamics in Greece: New evidence from asymmetric ARDL cointegration," Economic Modelling, Elsevier, vol. 29(4), pages 1064-1069.
  7. Kajuth, Florian & Knetsch, Thomas A. & Pinkwart, Nicolas, 2013. "Assessing house prices in Germany: Evidence from an estimated stock-flow model using regional data," Discussion Papers 46/2013, Deutsche Bundesbank, Research Centre.
  8. Takáts, Előd, 2012. "Aging and house prices," Journal of Housing Economics, Elsevier, vol. 21(2), pages 131-141.

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