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House Price Dynamics and Granger Causality: An Analysis of Taipei New Dwelling Market

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    Abstract

    The primary purpose of this paper is to examine dynamic causal relationships between house price and its five determinants, including total household income, short-run interest rates, stock price index, construction costs, and housing completions, in Taipei new dwelling market. Granger causality tests, variance decomposition, impulse response functions based on the vector error-correction model are utilised. All five determinants Granger cause house prices, but only house prices and stock price index have a bilateral feedback effect. The variance decomposition results suggest that disturbances originating from current house prices inflict greatest variability (66 percent of variance) to future prices. The remaining 34 percent of the variance is explained by the five determinants. On the supply side, the construction costs and housing completions together explain about 10 percent of the house price variance. On the demand side, short-run interest rates, total household income and stock price index explain about 24 percent of the variance.

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    Bibliographic Info

    Article provided by Asian Real Estate Society in its journal International Real Estate Research.

    Volume (Year): 1 (1998)
    Issue (Month): 1 ()
    Pages: 101-126

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    Handle: RePEc:ire:issued:v:01:n:01:1998:p:101-126

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    Postal: Asia Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
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    Web page: http://www.asres.org/

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    Postal: Asian Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
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    Web: http://www.asres.org/

    Related research

    Keywords: Vector Error-correction Model; Granger Causality Test; Generalised Impulse Response Function;

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    Cited by:
    1. Pami Dua, 2008. "Analysis of Consumers’ Perceptions of Buying Conditions for Houses," The Journal of Real Estate Finance and Economics, Springer, vol. 37(4), pages 335-350, November.
    2. Bharat Barot & Zan Yang, 2004. "House Prices and Housing Investment in Sweden and the UK. Econometric analysis for the period 1970-1998," Macroeconomics 0409022, EconWPA.
    3. Gabor Vadas, 2005. "Modelling Households' Savings and Dwellings Investment - A Portfolio Choice Approach," Macroeconomics 0507013, EconWPA.
    4. Bharat Barot, 2004. "Growth and Business Cycles for the Swedish Economy 1963-1999," Macroeconomics 0409017, EconWPA.
    5. Jie Zhang & Jianhua Wang & Aiyong Zhu, 2012. "The relationship between real estate investment and economic growth in China: a threshold effect," The Annals of Regional Science, Springer, vol. 48(1), pages 123-134, February.
    6. Barot, Bharat & Yang, Zan, 2002. "House Prices and Housing Investment in Sweden and the United Kingdom: Econometric Analysis for the Period 1970-1998," Working Paper 80, National Institute of Economic Research.
    7. E. Philip Davis & Haibin Zhu, 2004. "Bank lending and commercial property cycles: some cross-country evidence," BIS Working Papers 150, Bank for International Settlements.
    8. Orhan Erdem & Ali Coskun, 2012. "A Survey-Based Analysis of Housing Market," Working Paper 02, Research and Business Development Department, Borsa Istanbul.
    9. Vadas, Gábor & Kiss, Gergely, 2006. "A lakáspiac szerepe a monetáris transzmisszióban
      [The role of the housing market in monetary transmission]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 408-427.

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