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Testing for bubbles in housing markets: new results using a new method

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  • Gómez-González, José E.

    (Banco de la República)

  • Ojeda-Joya, Jair N.

    (Banco de la República)

  • Rey-Guerra, Catalina

    (Banco de la República)

  • Sicard, Natalia

    (Banco de la República)

Abstract

In the context of financial crises influenced by the development and burst of housing price bubbles, the detection of exuberant behaviors in the financial market and the implementation of early warning diagnosis tests are of vital importance. This paper applies the new method developed by Phillips et al (2012) for detecting bubbles in the Colombian residential property market. The empirical results suggest that currently the country could be experiencing a price bubble, when the CPI and the housing rent index are used as deflators. We do not check the robustness of these results to alternative deflators, such as a household income index and a land price index, due to the lack of monthly data on these indicators.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Dallas in its series Globalization and Monetary Policy Institute Working Paper with number 164.

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Length: 11 pages
Date of creation: 03 Jan 2014
Date of revision:
Handle: RePEc:fip:feddgw:164

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Keywords: housing-price bubbles; unit-root tests; Colombia;

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  1. Peter C. B. Phillips & Yangru Wu & Jun Yu, 2007. "Explosive Behavior in the 1990s Nasdaq: When Did Exuberance Escalate Asset Values?," Working Papers 222007, Hong Kong Institute for Monetary Research.
  2. Campbell, John Y & Shiller, Robert J, 1987. "Cointegration and Tests of Present Value Models," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 1062-88, October.
  3. Robert J. Shiller, 1980. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," NBER Working Papers 0456, National Bureau of Economic Research, Inc.
  4. Kenneth D. West, 1986. "A Specification Test for Speculative Bubbles," NBER Working Papers 2067, National Bureau of Economic Research, Inc.
  5. Diba, Behzad T & Grossman, Herschel I, 1988. "Explosive Rational Bubbles in Stock Prices?," American Economic Review, American Economic Association, vol. 78(3), pages 520-30, June.
  6. Evans, George W, 1991. "Pitfalls in Testing for Explosive Bubbles in Asset Prices," American Economic Review, American Economic Association, vol. 81(4), pages 922-30, September.
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Cited by:
  1. Gustavo Adolfo HERNANDEZ DIAZ & Gabriel PIRAQUIVE GALEANO, 2014. "Evolución de los precios de la vivienda en Colombia," ARCHIVOS DE ECONOMÍA 011208, DEPARTAMENTO NACIONAL DE PLANEACIÓN.

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