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Temporal Causality between House Prices and Output in the U.S.: A Bootstrap Rolling-Window Approach

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Author Info

  • Wendy Nyakabawo

    (University of Pretoria)

  • Stephen M. Miller

    (University of Nevada, Las Vegas and University of Connecticut)

  • Mehmet Balcilar

    (Eastern Mediterranean University)

  • Sonali Das

    (Council for Scientific and Industrial Research)

  • Rangan Gupta

    (University of Pretoria)

Abstract

This paper examines the causal relationships between the real house price index and real GDP per capita in the U.S., using the bootstrap Granger (temporal) non-causality test and a fixed-size rolling-window estimation approach. We use quarterly time-series data on the real house price index and real GDP per capita, covering the period 1963:Q1 to 2012:Q2. The full-sample bootstrap non-Granger causality test result suggests the existence of a unidirectional causality running from the real house price index to real GDP per capita. A wide variety of tests of parameter constancy used to examine the stability of the estimated vector autoregressive (VAR) models indicate short- and long-run instability. This suggests that we cannot rely on the full-sample causality tests and, hence, this warrants a time-varying (bootstrap) rolling-window approach to examine the causal relationship between these two variables. Using a rolling window size of 28 quarters, we find that while causality from the real house price to real GDP per capita occurs frequently, significant, but less frequent, evidence of real GDP per capita causing the real house price also occurs. These results imply that while the real house price leads real GDP per capita, in general (both during expansions and recessions), significant feedbacks also exist from real GDP per capita to the real house price.

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Bibliographic Info

Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2013-14.

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Length: 31 pages
Date of creation: Jun 2013
Date of revision:
Handle: RePEc:uct:uconnp:2013-14

Note: Stephen M. Miller is corresponding author.
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Postal: University of Connecticut 341 Mansfield Road, Unit 1063 Storrs, CT 06269-1063
Phone: (860) 486-4889
Fax: (860) 486-4463
Web page: http://www.econ.uconn.edu/
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Keywords: Real house price; Real GDP per capita; Bootstrap; Time-Varying Causality;

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References

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Cited by:
  1. Wendy Nyakabawo & Stephen M. Miller & Mehmet Balcilar & Sonali Das & Rangan Gupta, 2013. "Temporal Causality between House Prices and Output in the U.S.: A Bootstrap Rolling-Window Approach," Working papers, University of Connecticut, Department of Economics 2013-14, University of Connecticut, Department of Economics.
  2. Zied Ftiti & Essahbi Essaadi, 2014. "The inflation Targeting effect on the inflation series: A New Analysis Approach of evolutionary spectral analysis," Working Papers 2014-516, Department of Research, Ipag Business School.
  3. Furkan Emirmahmutoglu & Nicholas Apergis & Beatrice D. Simo-Kengne & Tsangyao Chang & Rangan Gupta, 2014. "Causal relationship between asset prices and output in the US: Evidence from state-level panel Granger causality test," Working Papers 2014-466, Department of Research, Ipag Business School.
  4. Plakandaras, Vasilios & Gupta, Rangan & Papadimitriou, Theophilos & Gogas, Periklis, 2014. "Forecasting the U.S. Real House Price Index," DUTH Research Papers in Economics 10-2014, Democritus University of Thrace, Department of Economics.
  5. Nicholas Apergis & Beatrice D. Simo-Kengne & Rangan Gupta & Tsangyao Chang, 2013. "The Dynamic Relationship between House Prices and Output: Evidence from US Metropolitan Statistical Areas," Working Papers 201349, University of Pretoria, Department of Economics.
  6. Mohamed Arouri & Shawkat Hammoudeh & Fredj Jawadi & Duc Khuong Nguyen, 2014. "Financial Linkages between U.S. Sector Credit Default Swaps Markets," Working Papers 2014-553, Department of Research, Ipag Business School.
  7. Goodness C. Aye & Rangan Gupta & Stephen M. Miller & Mehmet Balcilar, 2014. "Forecasting US Real Private Residential Fixed Investment Using a Large Number of Predictors," Working papers, University of Connecticut, Department of Economics 2014-10, University of Connecticut, Department of Economics.
  8. Frederic Teulon, 2014. "A la recherche de Maurice Allais," Working Papers 2014-548, Department of Research, Ipag Business School.

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