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Housing Policy Uncertainty in Korea and Its Effects on Housing Markets

Author

Listed:
  • Hyunduk Suh

    (Inha University)

  • So Jung Hwang

    (Inha University)

Abstract

We estimate housing policy uncertainty (HPU) in Korea, employing the economic policy uncertainty (EPU) method by Baker et al. (2016). The uncertainty index is measured by the frequency of texts in Korean newspapers that imply housing policy uncertainty during 1997-2022. The HPU index has been high in Moo-hyun Roh's and Myung-bak Lee's administrations and has risen again since 2020. Also, HPU tends to increase during large housing market policy announcements, political instability, and administrative regime changes. We also analyze the effect of HPU on housing markets by estimating a vector autoregressive (VAR) model. The VAR results suggest that a rise in HPU negatively affects housing prices and residential constructions but increases housing price volatility. Meanwhile, a positive shock in the housing prices endogenously raises HPU, which suggests that uncertainty was typically more significant in policies that aim to stabilize the housing market overheating.

Suggested Citation

  • Hyunduk Suh & So Jung Hwang, 2024. "Housing Policy Uncertainty in Korea and Its Effects on Housing Markets," Inha University IBER Working Paper Series 2024-1, Inha University, Institute of Business and Economic Research.
  • Handle: RePEc:inh:wpaper:2024-1
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    File URL: https://drive.google.com/file/d/19pmmf9_2rA-FpBwZI2yyPy80qG5iHmEL/view?usp=drive_link
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    More about this item

    Keywords

    housing policy; uncertainty; EPU; HPU; VAR;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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