Is there Evidence of Shift-Contagion in International Housing Markets?
AbstractThe paper attempts to provide, for housing markets, evidence of "shift-contagion" at the international level, i. e. regime shifts in the transmission of asset prices during crisis periods. The focus is in particular on UK and Spain. We use a Markov Switching FAVAR framework and regime-dependent impulse response functions. The `Crisis' regime which we identify endogenously is shown to also correspond to an exogenously determined index of frequency of financial crises in OECD countries, which peaked in the early 1990s and in the more recent Subprime crisis. Furthermore, we find that the response of domestic house price to a shock to a common (global) house price factor during a `Crisis' regime is relatively more amplified than in a `Normal' (more tranquil) regime. Less compelling evidence is found for France.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Banque de France in its series Working papers with number 295.
Length: 31 pages
Date of creation: 2010
Date of revision:
contagion; housing market; regime shifts; FAVAR model;
Find related papers by JEL classification:
- R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-23 (All new papers)
- NEP-EEC-2010-10-23 (European Economics)
- NEP-URE-2010-10-23 (Urban & Real Estate Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Martin, V. & Dungey & M., 2004.
"Empirical Modelling of Contagion: A Review of Methodologies,"
Econometric Society 2004 Far Eastern Meetings
574, Econometric Society.
- Mardi Dungey & Renee Fry & Brenda Gonzalez-Hermosillo & Vance Martin, 2005. "Empirical modelling of contagion: a review of methodologies," Quantitative Finance, Taylor & Francis Journals, vol. 5(1), pages 9-24.
- Vance L. Martin & Brenda Gonzalez-Hermosillo, & Mardi Dungey & Renee A. Fry, 2004. "Empirical Modelling of Contagion: A Review of Methodologies," Econometric Society 2004 Australasian Meetings 243, Econometric Society.
- Mardi Dungey & Renee Fry & Vance Martin & Brenda GonzÃ¡lez-Hermosillo, 2004. "Empirical Modeling of Contagion: A Review of Methodologies," IMF Working Papers 04/78, International Monetary Fund.
- M. Hashem Pesaran & Andreas Pick, 2004.
"Econometric Issues in the Analysis of Contagion,"
CESifo Working Paper Series
1176, CESifo Group Munich.
- Hashem Pesaran & Andreas Pick, 2004. "Econometric Issues in the Analysis of Contagion," Money Macro and Finance (MMF) Research Group Conference 2004 67, Money Macro and Finance Research Group.
- Pesaran, M.H. & Pick, A., 2004. "Econometric Issues in the Analysis of Contagion," Cambridge Working Papers in Economics 0402, Faculty of Economics, University of Cambridge.
- Robert G. King & Charles I. Plosser & James H. Stock & Mark W. Watson, 1992.
"Stochastic Trends and Economic Fluctuations,"
NBER Working Papers
2229, National Bureau of Economic Research, Inc.
- Hamao, Yasushi & Masulis, Ronald W & Ng, Victor, 1990. "Correlations in Price Changes and Volatility across International Stock Markets," Review of Financial Studies, Society for Financial Studies, vol. 3(2), pages 281-307.
- Eichengreen, Barry & Rose, Andrew & Wyplosz, Charles, 1996. " Contagious Currency Crises: First Tests," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(4), pages 463-84, December.
- Garcia, Rene, 1998.
"Asymptotic Null Distribution of the Likelihood Ratio Test in Markov Switching Models,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 763-88, August.
- René Garcia, 1995. "Asymptotic Null Distribution of the Likelihood Ratio Test in Markov Switching Models," CIRANO Working Papers 95s-07, CIRANO.
- Mico Loretan & William B. English, 2000. "Evaluating "correlation breakdowns" during periods of market volatility," International Finance Discussion Papers 658, Board of Governors of the Federal Reserve System (U.S.).
- Geert Bekaert & Campbell R. Harvey, 1994.
"Time-Varying World Market Integration,"
NBER Working Papers
4843, National Bureau of Economic Research, Inc.
- Reinhart, Carmen & Kaminsky, Graciela, 2002.
"Financial markets in time of stress,"
13869, University Library of Munich, Germany.
- Pavlova, Anna & Rigobon, Roberto, 2008.
"The Role of Portfolio Constraints in the International Propagation of Shocks,"
CEPR Discussion Papers
6647, C.E.P.R. Discussion Papers.
- Anna Pavlova & Roberto Rigobon, 2008. "The Role of Portfolio Constraints in the International Propagation of Shocks," Review of Economic Studies, Oxford University Press, vol. 75(4), pages 1215-1256.
- Corsetti, Giancarlo & Pericoli, Marcello & Sbracia, Massimo, 2005.
"'Some contagion, some interdependence': More pitfalls in tests of financial contagion,"
Journal of International Money and Finance,
Elsevier, vol. 24(8), pages 1177-1199, December.
- Corsetti, Giancarlo & Pericoli, Marcello & Sbracia, Massimo, 2002. "Some Contagion, Some Interdependence: More Pitfalls in Tests of Financial Contagion," CEPR Discussion Papers 3310, C.E.P.R. Discussion Papers.
- Krolzig, H.-M. & Toro, J., 1999. "A New Approach to the Analysis of Shocks and the Cycle in a Model of Output and Employment," Economics Working Papers eco99/30, European University Institute.
- Mervyn A. King & Sushil Wadhwani, 1989.
"Transmission of Volatility Between Stock Markets,"
NBER Working Papers
2910, National Bureau of Economic Research, Inc.
- Kruger, Mark & Osakwe, Patrick N. & Page, Jennifer, 1998. "Fundamentals, Contagion and Currency Crises: An Empirical Analysis," Working Papers 98-10, Bank of Canada.
- Arrondel, L. & Savignac, F., 2009.
"Stockholding: Does housing wealth matter?,"
266, Banque de France.
- Ray Yeu-Tien Chou & Victor Ng & Lynn K. Pi, 1994. "Cointegration of International Stock Market Indices," IMF Working Papers 94/94, International Monetary Fund.
- Toni Gravelle & Maral Kichian & James Morley, 2002.
"Detecting shift-contagion in currency and bond markets,"
Computing in Economics and Finance 2002
58, Society for Computational Economics.
- Gravelle, Toni & Kichian, Maral & Morley, James, 2006. "Detecting shift-contagion in currency and bond markets," Journal of International Economics, Elsevier, vol. 68(2), pages 409-423, March.
- Beltratti, Andrea & Morana, Claudio, 2010. "International house prices and macroeconomic fluctuations," Journal of Banking & Finance, Elsevier, vol. 34(3), pages 533-545, March.
- Marcel Fratzscher, 2000.
"On Currency Crises and Contagion,"
Working Paper Series
WP00-9, Peterson Institute for International Economics.
- DiPasquale Denise & Wheaton William C., 1994. "Housing Market Dynamics and the Future of Housing Prices," Journal of Urban Economics, Elsevier, vol. 35(1), pages 1-27, January.
- Roberto Rigobon, 2001.
"Contagion: How to Measure It?,"
NBER Working Papers
8118, National Bureau of Economic Research, Inc.
- Melvyn Weeks & Mark R. Stone, 2001. "Systemic Financial Crises, Balance Sheets, and Model Uncertainity," IMF Working Papers 01/162, International Monetary Fund.
- de Bandt, O. & Barhoumi, K. & Bruneau, C., 2010. "The international transmission of house price shocks," Working papers 274, Banque de France.
- Favero, Carlo A. & Giavazzi, Francesco, 2002. "Is the international propagation of financial shocks non-linear?: Evidence from the ERM," Journal of International Economics, Elsevier, vol. 57(1), pages 231-246, June.
- Krolzig, Hans-Martin, 2001. "Business cycle measurement in the presence of structural change: international evidence," International Journal of Forecasting, Elsevier, vol. 17(3), pages 349-368.
- Rigobon, Roberto, 2003. "On the measurement of the international propagation of shocks: is the transmission stable?," Journal of International Economics, Elsevier, vol. 61(2), pages 261-283, December.
- Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
- James H. Stock & Mark W. Watson, 2005. "Implications of Dynamic Factor Models for VAR Analysis," NBER Working Papers 11467, National Bureau of Economic Research, Inc.
- Ehrmann, Michael & Ellison, Martin & Valla, Natacha, 2003.
"Regime-dependent impulse response functions in a Markov-switching vector autoregression model,"
Elsevier, vol. 78(3), pages 295-299, March.
- Tom Doan, . "RATS program to replicate Ehrmann-Ellison-Valla(2003) regime dependent impulse response," Statistical Software Components RTZ00177, Boston College Department of Economics.
- Ehrmann , Michael & Ellison, Martin & Valla, Natacha, 2001. "Regime-dependent impulse response functions in a Markov-switching vector autoregression model," Research Discussion Papers 11/2001, Bank of Finland.
- Kristin J. Forbes & Roberto Rigobon, 2002.
"No Contagion, Only Interdependence: Measuring Stock Market Comovements,"
Journal of Finance,
American Finance Association, vol. 57(5), pages 2223-2261, October.
- Kristin Forbes & Roberto Rigobon, 1999. "No Contagion, Only Interdependence: Measuring Stock Market Co-movements," NBER Working Papers 7267, National Bureau of Economic Research, Inc.
- Hamilton, James D., 1990. "Analysis of time series subject to changes in regime," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 39-70.
- Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
- Edwards, Sebastian & Rigobon, Roberto, 2002. "Currency crises and contagion: an introduction," Journal of Development Economics, Elsevier, vol. 69(2), pages 307-313, December.
- Andrew Ang & Geert Bekaert, 1999. "International Asset Allocation with Time-Varying Correlations," NBER Working Papers 7056, National Bureau of Economic Research, Inc.
- Ilan Goldfajn & Taimur Baig, 1999. "Financial market contagion in the Asian crisis," Textos para discussÃ£o 400, Department of Economics PUC-Rio (Brazil).
- Kaabia, Olfa & Abid, Ilyes & Guesmi, Khaled, 2013.
"Does Bayesian shrinkage help to better reflect what happened during the subprime crisis?,"
Elsevier, vol. 31(C), pages 423-432.
- Olfa Kaabia & Ilyes Abid & Khaled Guesmi, 2012. "Does Bayesian Shrinkage Help to Better Reflect What Happened during the Subprime Crisis?," EconomiX Working Papers 2012-46, University of Paris West - Nanterre la Défense, EconomiX.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marie-Christine Petit-Djemad).
If references are entirely missing, you can add them using this form.