Is There A Stable Relationship Between Real Interest Rates And Housing Prices? Evidence From Several Euro Area Countries
AbstractThis paper analyzes the relationship between real interest rates and housing prices in three European Union countries (France, Spain and the Netherlands) between 1999 and 2010. The main objective is to test whether there is a stable long-run relationship between both variables, as well as whether there are differences across countries. In order to do so, I use different real interest rates (short-term and long-term) and different housing price indices (nominal and real), and apply cointegration techniques and propose an error correction model, following the two-stage methodology suggested by Engle and Granger, in order to examine the different dynamics in the short and the long term. The main conclusion is that the relationship between real interest rates and housing prices is weak, although there are differences across countries. This has some implications for the single monetary policy conducted by the European Central Bank.
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Bibliographic InfoArticle provided by "Stefan cel Mare" University of Suceava, Romania, Faculty of Economics and Public Administration in its journal The Annals of the "Stefan cel Mare" University of Suceava. Fascicle of The Faculty of Economics and Public Administration.
Volume (Year): 11 (2011)
Issue (Month): 2(14) (December)
Housing price; monetary policy; interest rate; monetary union; cointegration; error correction model;
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