Gaia Garino () (Department of Economics, University of Leicester) Lucio Sarno () (University of Warwick, International Monetary Fund, Federal Reserve Bank of St. Louis, and Centre for Economic Policy Research (CEPR))
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In this article, we test the view, widely held among both academics and practitioners, that speculative bubbles have characterized the time series behavior of U.K. house prices in recent times. We motivate our empirical analysis using a stylized overlapping-generations model which generates a housing demand function of the form assumed by a large literature, illustrating how rational bubbles may arise as a solution to the house price determination equation. Employing two recently developed econometric techniques specifically designed to test for rational bubbles, we then provide empirical evidence for the existence of bubbles in U.K. house prices over the sample period 1983–2002.
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Volume (Year): 70 (2004) Issue (Month): 4 (April) Pages: 777-795 Download reference. The following formats are available: HTML
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Find related papers by JEL classification: D91 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Consumer Choice; Life Cycle Models and Saving G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages R21 - Urban, Rural, and Regional Economics - - Household Analysis - - - Housing Demand R31 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location - - - Housing Supply and Markets
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