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Modeling regional house prices

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Author Info

  • Dijk, A. van
  • Franses, Ph.H.B.F.
  • Paap, R.
  • Dijk, D.J.C. van

Abstract

We develop a parsimonious panel model for quarterly regional house prices, for which both the cross-section and the time series dimension is large. The model allows for stochastic trends, cointegration, cross-equation correlations and, most importantly, latent-class clustering of regions. Class membership is fully data-driven and based on (i) average growth rates of house prices, (ii) the propagation of shocks to house prices across regions, also known as the ripple effect, and (iii) the relationship of house prices with economic growth and other variables. Applying the model to quarterly data for the Netherlands, we find convincing evidence for the existence of two distinct clusters of regions, with pronounced differences in house price dynamics.

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File URL: http://hdl.handle.net/1765/11723
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Bibliographic Info

Paper provided by Erasmus University Rotterdam, Econometric Institute in its series Econometric Institute Report with number EI 2007-55.

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Date of creation: 01 Dec 2007
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Handle: RePEc:dgr:eureir:1765011723

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Web page: http://www.few.eur.nl/few

Related research

Keywords: cointegration; ripple effect; cross-section dependence;

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Cited by:
  1. S Holly & M Hashem Pesaran & T Yamagata, . "Spatial and Temporal Diffusion of House Prices in the UK," Discussion Papers 09/32, Department of Economics, University of York.
  2. Ceren Ozgen & Thomas de Graff, 2013. "Sorting out the impact of cultural diversity on innovative firms. An empirical analysis of Dutch micro-data," Norface Discussion Paper Series 2013012, Norface Research Programme on Migration, Department of Economics, University College London.
  3. Katharina Pijnenburg, 2013. "The Spatial Dimension of US House Price Developments," Discussion Papers of DIW Berlin 1270, DIW Berlin, German Institute for Economic Research.
  4. James D. Hamilton & Michael T. Owyang, 2012. "The Propagation of Regional Recessions," The Review of Economics and Statistics, MIT Press, vol. 94(4), pages 935-947, November.
  5. Maureen B.M. Lankhuizen & Thomas de Graaff & Henri L.F. de Groot, 2012. "Product Heterogeneity, Intangible Barriers and Distance Decay: The Effect of Multiple Dimensions of Distance on Trade across Different Product Categories," Tinbergen Institute Discussion Papers 12-065/3, Tinbergen Institute.

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