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What Drives Ireland’s Housing Market? A Bayesian DSGE Approach

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  • Eric Mayer

    ()

  • Johannes Gareis

Abstract

We study the drivers of fluctuations in the Irish housing market by developing and estimating a dynamic stochastic general equilibrium (DSGE) model of Ireland as a member of the European Economic Monetary Union (EMU). We estimate the model with Bayesian methods using time series for both Ireland and the rest of the EMU for the period from 1997:Q1 to 2008:Q2. We find that housing preference and technology shocks are the main drivers of fluctuations in house prices and residential investment. A standard regression analysis shows that a good part of the variation of housing preference shocks can be explained by unmodeled demand factors that have been considered in the empirical literature as important determinants of Irish house prices. Copyright Springer Science+Business Media New York 2013

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Bibliographic Info

Article provided by Springer in its journal Open Economies Review.

Volume (Year): 24 (2013)
Issue (Month): 5 (November)
Pages: 919-961

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Handle: RePEc:kap:openec:v:24:y:2013:i:5:p:919-961

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Web page: http://www.springerlink.com/link.asp?id=100323

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Keywords: Housing; Monetary policy; Bayesian estimation; E44; E52; F41;

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Cited by:
  1. Gerlach, Petra & Merola, Rossana, 2013. "Consumption and Credit Constraints: A Model and Evidence for Ireland," Papers WP471, Economic and Social Research Institute (ESRI).

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