Price and Transaction Volume in the Dutch Housing Market
AbstractHousing markets typically exhibit a strong positive correlation between the rate of price increase and the number of houses sold. We document this correlation on high-quality Dutch data for the period 1985-2007, and estimate a VEC-model that allows us to study the mechanism giving rise to the correlation. The data identify the flows of new houses offered for sale as well as the number of houses sold. According to the estimated model, shocks to market fundamentals (the mortgage rate)have an immediate and significant impact on the rate of sale, little impact on the rate of entry of new houses for sale, and a gradual impact on the house prices. This pattern is consistent with a search model where buyers and sellers gradually learn about changes in market conditions.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 10-039/2.
Date of creation: 13 Apr 2010
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price-volume correlation; time-on-the-market; vector error correction model;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- E29 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Other
- G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation
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- Ortalo-Magne, Francois & Rady, Sven, 2004. "Housing Transactions and Macroeconomic Fluctuations: A Case Study of England," 2004 Meeting Papers 207c, Society for Economic Dynamics.
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