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The Dynamic Relationship between House Prices and Output: Evidence from US Metropolitan Statistical Areas

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Author Info

  • Nicholas Apergis

    ()
    (Department of Banking and Financial Management, University of Piraeus, Greece)

  • Beatrice D. Simo-Kengne

    ()
    (Department of Economics, University of Pretoria)

  • Rangan Gupta

    ()
    (Department of Economics, University of Pretoria)

  • Tsangyao Chang

    ()
    (Department of Finance, Feng Chia University, Taichung, Taiwan)

Abstract

This paper investigates the long-run and short-term dynamics of 351 US metropolitan statistical area housing prices in relation to personal income. We apply a panel cointegration approach on annual data from 1993 to 2011 and find a long-run relationship between local house prices and per capita personal income. The causal direction is then assessed based on an autoregressive distributed lag specification that also accommodates for error-correction. Results from Granger-causality tests reveal the existence of a bi-directional causality between real house prices and real per capita personal income over both long- and short-horizons. We conclude that changes in personal income can predict house price movements and vice versa.

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Bibliographic Info

Paper provided by University of Pretoria, Department of Economics in its series Working Papers with number 201349.

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Length: 15 pages
Date of creation: Jun 2013
Date of revision:
Handle: RePEc:pre:wpaper:201349

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Keywords: Real house prices; Real personal income per capita; Panel cointegration; Panel causality;

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References

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