IDEAS home Printed from https://ideas.repec.org/a/fau/fauart/v61y2011i1p49-66.html
   My bibliography  Save this article

Is There a Real Estate Bubble in the Czech Republic?

Author

Abstract

Real estate prices more than doubled in many countries of Central and Eastern Europe from 2003 to 2008. In this paper, I provide one of the first assessments of whether housing prices in this region correspond to rents, i.e. to cash-flows related to an apartment purchase. State-of-the-art panel data stationarity and Granger causality techniques are employed to test the implications of the standard present value model using regional data from the Czech Republic. Apartment prices are only slightly overvalued. In addition, changes in prices are helpful in predicting changes in rents and vice versa.

Suggested Citation

  • Petr Zemcik, 2011. "Is There a Real Estate Bubble in the Czech Republic?," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 61(1), pages 49-66, January.
    • Handle: RePEc:fau:fauart:v:61:y:2011:i:1:p:49-66
    as

    Download full text from publisher

    File URL: http://journal.fsv.cuni.cz/storage/1204_zemcik.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Balázs Égert & Dubravko Mihaljek, 2007. "Determinants of House Prices in Central and Eastern Europe," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 49(3), pages 367-388, September.
    2. Clark, Todd E., 1995. "Rents and prices of housing across areas of the United States. A cross-section examination of the present value model," Regional Science and Urban Economics, Elsevier, vol. 25(2), pages 237-247, April.
    3. M. Hashem Pesaran, 2007. "A simple panel unit root test in the presence of cross-section dependence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 265-312.
    4. M. Hashem Pesaran, 2021. "General diagnostic tests for cross-sectional dependence in panels," Empirical Economics, Springer, vol. 60(1), pages 13-50, January.
    5. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    6. Christophe Hurlin, 2004. "Testing Granger causality in Heterogeneous panel data models with fixed coefficients," Post-Print halshs-00257395, HAL.
    7. Capozza, Dennis R. & Seguin, Paul J., 1996. "Expectations, efficiency, and euphoria in the housing market," Regional Science and Urban Economics, Elsevier, vol. 26(3-4), pages 369-386, June.
    8. Campbell, John Y & Shiller, Robert J, 1987. "Cointegration and Tests of Present Value Models," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 1062-1088, October.
    9. Hamilton, James D, 1986. "On Testing for Self-fulfilling Speculative Price Bubbles," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(3), pages 545-552, October.
    10. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(2), pages 277-297.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Petr Zemcik, 2009. "Housing Markets in Central and Eastern Europe: Is There a Bubble in the Czech Republic?," CERGE-EI Working Papers wp390, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    2. Vyacheslav Mikhed & Petr Zemčík, 2009. "Testing for Bubbles in Housing Markets: A Panel Data Approach," The Journal of Real Estate Finance and Economics, Springer, vol. 38(4), pages 366-386, May.
    3. Vyacheslav Mikhed & Petr Zemcik, 2007. "Testing for Bubbles in Housing Markets: A Panel Data Approach," CERGE-EI Working Papers wp338, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    4. MAÏ ASSAN CHEDI, Maman, 2022. "Does Defence Expenditure Affect Education and Health expenditures in Saharan Africa?," African Journal of Economic Review, African Journal of Economic Review, vol. 10(4), September.
    5. Nguyen Phuc Canh & Nguyen Thanh Binh & Su Dinh Thanh & Christophe Schinckus, 2020. "Determinants of foreign direct investment inflows: The role of economic policy uncertainty," International Economics, CEPII research center, issue 161, pages 159-172.
    6. T. Gries & M. Redlin, 2020. "Trade and economic development: global causality and development- and openness-related heterogeneity," International Economics and Economic Policy, Springer, vol. 17(4), pages 923-944, October.
    7. Mouhamadou Sy & Hamidreza Tabarraei, 2010. "Capital inflows and exchange rate in LDCs: The Dutch disease problem revisited," Working Papers halshs-00574955, HAL.
    8. Charles Shaaba Saba & Nicholas Ngepah, 2022. "ICT Diffusion, Industrialisation and Economic Growth Nexus: an International Cross-country Analysis," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(3), pages 2030-2069, September.
    9. Niklas Potrafke, 2012. "Political cycles and economic performance in OECD countries: empirical evidence from 1951–2006," Public Choice, Springer, vol. 150(1), pages 155-179, January.
    10. Kholodilin Konstantin A. & Menz Jan-Oliver & Siliverstovs Boriss, 2010. "What Drives Housing Prices Down? Evidence from an International Panel," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 230(1), pages 59-76, February.
    11. Siamand Hesami & Bezhan Rustamov & Husam Rjoub & Wing-Keung Wong, 2020. "Implications of Oil Price Fluctuations for Tourism Receipts: The Case of Oil Exporting Countries," Energies, MDPI, vol. 13(17), pages 1-17, August.
    12. Canarella, Giorgio & Miller, Stephen M. & Nourayi, Mahmoud M., 2013. "Firm profitability: Mean-reverting or random-walk behavior?," Journal of Economics and Business, Elsevier, vol. 66(C), pages 76-97.
    13. Chen, Chaoyi & Pinar, Mehmet & Stengos, Thanasis, 2021. "Determinants of renewable energy consumption: Importance of democratic institutions," Renewable Energy, Elsevier, vol. 179(C), pages 75-83.
    14. Lau, Lin-Sea & Choong, Chee-Keong & Ng, Cheong-Fatt & Liew, Feng-Mei & Ching, Suet-Ling, 2019. "Is nuclear energy clean? Revisit of Environmental Kuznets Curve hypothesis in OECD countries," Economic Modelling, Elsevier, vol. 77(C), pages 12-20.
    15. Samuel Adams & Edem Kwame Mensah Klobodu, 2019. "Urbanization, Economic Structure, Political Regime, and Income Inequality," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 142(3), pages 971-995, April.
    16. Sung, Bongsuk & Song, Woo-Yong & Park, Sang-Do, 2018. "How foreign direct investment affects CO2 emission levels in the Chinese manufacturing industry: Evidence from panel data," Economic Systems, Elsevier, vol. 42(2), pages 320-331.
    17. Le, Thai-Ha & Chang, Youngho & Park, Donghyun, 2016. "Trade openness and environmental quality: International evidence," Energy Policy, Elsevier, vol. 92(C), pages 45-55.
    18. Markus Eberhardt & Francis Teal, 2011. "Econometrics For Grumblers: A New Look At The Literature On Cross‐Country Growth Empirics," Journal of Economic Surveys, Wiley Blackwell, vol. 25(1), pages 109-155, February.
    19. Markus Eberhardt & Francis Teal, 2008. "Modeling Technology and Technological Change in Manufacturing: How do Countries Differ?," CSAE Working Paper Series 2008-12, Centre for the Study of African Economies, University of Oxford.
    20. Joëts, Marc & Mignon, Valérie, 2012. "On the link between forward energy prices: A nonlinear panel cointegration approach," Energy Economics, Elsevier, vol. 34(4), pages 1170-1175.

    More about this item

    Keywords

    Central and Eastern Europe; Czech Republic; panel data; unit root; bubble; house prices; rents;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • 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, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fau:fauart:v:61:y:2011:i:1:p:49-66. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Natalie Svarcova (email available below). General contact details of provider: https://edirc.repec.org/data/icunicz.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.