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Economic policy uncertainty and housing returns in Germany: Evidence from a bootstrap rolling window

Author

Listed:
  • David Su

    (Department of Finance, Ocean University of China, Shandong, China)

  • Xin Li

    (Department of Finance, Ocean University of China, Shandong, China)

  • Oana-Ramona Lobonþ

    (Department of Finance, West University of Timisoara, Timisoara, Romania)

  • Yanping Zhao

    (Department of International Trade, Ocean University of China, Shandong, China)

Abstract

The purpose of this investigation is to research the causal link between economic policy uncertainty (EPU) and the housing returns (HR) in Germany. In the estimated vector autoregressive models, we test its stability and find the short-run relationship between HR and EPU is unstable. As a result, a time-varying approach (bootstrap rolling window causality test) is utilized to revisit the dynamic causal link, and we find EPU has no impact on HR due to the stability of the real estate market in Germany. HR does not have significant effects on EPU in most time periods. However, significant feedback in several sub-periods (both positive and negative) are found from HR to EPU, which indicates the causal link from HR to EPU varies over time. The empirical results do not support the general equilibrium model of government policy choices that indicate EPU does not play a role in the real estate market. The basic conclusion is that the real estate market shows its stability due to the social welfare nature and the rational institutional arrangement of the real estate in Germany, and the real estate market also shows its importance that it has significant effect on the economic policy choice in some periods when negative external shocks occur.

Suggested Citation

  • David Su & Xin Li & Oana-Ramona Lobonþ & Yanping Zhao, 2016. "Economic policy uncertainty and housing returns in Germany: Evidence from a bootstrap rolling window," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 34(1), pages 43-61.
    • Handle: RePEc:rfe:zbefri:v:34:y:2016:i:1:p:43-61
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    References listed on IDEAS

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    Cited by:

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    2. Yilanci, Veli & Kilci, Esra N., 2021. "The role of economic policy uncertainty and geopolitical risk in predicting prices of precious metals: Evidence from a time-varying bootstrap causality test," Resources Policy, Elsevier, vol. 72(C).
    3. Miao Li & Gaoqiang Wu, 2020. "The Impact of Economic Policy Uncertainty on Real Estate Development in China," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 10(4), pages 1-2.
    4. Huang, Wei-Ling & Lin, Wen-Yuan & Ning, Shao-Lin, 2020. "The effect of economic policy uncertainty on China’s housing market," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    5. Yin DAI & Jing-wen ZHANG & Xiu-zhen YU & Xin LI, 2017. "Causality between economic policy uncertainty and exchange rate in China with considering quantile differences," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(612), A), pages 29-38, Autumn.

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    More about this item

    Keywords

    housing returns; Economic Policy Uncertainty; time-varying causality;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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