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House prices and unemployment: an empirical analysis of causality

Author

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  • Manuchehr Irandoust

Abstract

Purpose - This paper aims to examine whether there exists a long-run causal relationship between house prices and unemployment rates for eight major European countries. Design/methodology/approach - The bootstrap panel Granger causality approach that accounts for cross-sectional dependence, slope heterogeneity and structural breaks is used to detect the direction of causality. Findings - The empirical findings for the overall panel support the presence of unidirectional causality running from house prices to unemployment. Practical implications - The findings are not only important for households but also for policymakers concerned with economic and financial stability. Originality/value - There are only a limited number of studies that have investigated the direct link between house prices and employment or unemployment. Given the increased importance of labor market variables, particularly the choice of the unemployment rate as a key indicator in designing forward guidance and the increased financial stability concerns regarding house price dynamics, it is important to better understand the causal linkages between house prices and unemployment rates. To the best of the author’s knowledge, this paper is the first to apply the bootstrap panel Granger causality approach to examine the relationship between house prices and unemployment rates.

Suggested Citation

  • Manuchehr Irandoust, 2019. "House prices and unemployment: an empirical analysis of causality," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 12(1), pages 148-164, February.
    • Handle: RePEc:eme:ijhmap:ijhma-03-2018-0021
    DOI: 10.1108/IJHMA-03-2018-0021
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    Citations

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    Cited by:

    1. Irandoust, Manuchehr, 2022. "Industrial growth versus agricultural growth in eight post-communist countries," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 529-537.
    2. Benjamin Kwakye & Chan Tze Haw, 2020. "Interplay of the Macroeconomy and Real Estate: Systematic Review of Literature," International Journal of Economics and Financial Issues, Econjournals, vol. 10(5), pages 262-271.
    3. Marilena Mironiuc & Elena Ionașcu & Maria Carmen Huian & Alina Țaran, 2021. "Reflecting the Sustainability Dimensions on the Residential Real Estate Prices," Sustainability, MDPI, vol. 13(5), pages 1-28, March.
    4. David Mazáček & Jiří Panoš, 2022. "Key determinants of new residential real estate prices in Prague," FFA Working Papers 5.002, Prague University of Economics and Business, revised 11 Apr 2023.
    5. Vicente Aprigliano Fernandes & Ricardo R. Pacheco & Elton Fernandes & Manoela Cabo & Rodrigo V. Ventura & Rafael Caixeta, 2021. "Air Transportation, Economy and Causality: Remote Towns in Brazil’s Amazon Region," Sustainability, MDPI, vol. 13(2), pages 1-14, January.

    More about this item

    Keywords

    House prices; Households; Financial stability; Home ownership; Panel causality; Unemployment rates; R21; E24; J64;
    All these keywords.

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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