The Nonlinear House Price Adjustment Process in Developed and Transition Countries
AbstractWe use a nonlinear framework in order to explore house price determinants and their adjustment properties. We test for threshold cointegration using a sample of four developed countries (the United States, the United Kingdom, Spain, and Ireland) and four transition countries (Bulgaria, Croatia, the Czech Republic, and Estonia). All eight countries experienced an intensive increase in house prices during the 1990s and the first half of this decade. In addition to testing for nonlinearities, we focus on house price determinants in these four transition countries of Central and Eastern Europe. An asymmetric house price adjustment is present in all transition countries and the U.S., while no threshold effects are detected in developed European countries. In a threshold error correction framework, house prices are aligned with the fundamentals; but house price persistence coupled with a slow and asymmetric house price adjustment process might have facilitated the house price boom in transition countries and the U.S.
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Bibliographic InfoPaper provided by The Institute of Economics, Zagreb in its series Working Papers with number 1001.
Length: 28 pages
Date of creation: Mar 2010
Date of revision:
Publication status: Published in CPB document No 154
house prices; threshold cointegration; asymmetric adjustment; transition;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
- R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Production Analysis, and Firm Location - - - Housing Supply and Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-05-02 (All new papers)
- NEP-TRA-2010-05-02 (Transition Economics)
- NEP-URE-2010-05-02 (Urban & Real Estate Economics)
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