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Does Interest Rate Volatility Affect The Us Demand For Housing? Evidence From The Autoregressive Distributed Lag Method

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  • TAUFIQ CHOUDHRY

Abstract

This paper investigates empirically the effects of real interest rate volatility on demand for total housing and new housing in the USA. The investigation looks at monthly data from 1975 to 2006 using the autoregressive distributed lag bounds testing approach to co-integration and the Hendry 'general-to-specific' causality test. Three different real rates are applied: mortgage, long term and short term. The results indicate a long-run equilibrium relationship between housing demand and its determinants including interest rate volatility. Results from the causality test indicate housing demand determinants (including interest rate volatility) cause demand for both total and new housing in the long run. Copyright © 2010 The Author. Journal compilation © 2010 Blackwell Publishing Ltd and The University of Manchester.

Suggested Citation

  • Taufiq Choudhry, 2010. "Does Interest Rate Volatility Affect The Us Demand For Housing? Evidence From The Autoregressive Distributed Lag Method," Manchester School, University of Manchester, vol. 78(4), pages 326-344, July.
  • Handle: RePEc:bla:manchs:v:78:y:2010:i:4:p:326-344
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    References listed on IDEAS

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    6. Choudhry, Taufiq, 1999. "Does Interest Rate Volatility Affect the US M1 Demand Function? Evidence from Cointegration," Manchester School, University of Manchester, vol. 67(6), pages 621-648, December.
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    Cited by:

    1. Wadud, I.K.M. Mokhtarul & Bashar, Omar H.M.N. & Ahmed, Huson Joher Ali, 2012. "Monetary policy and the housing market in Australia," Journal of Policy Modeling, Elsevier, vol. 34(6), pages 849-863.

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