Do lower mortgage rates mean higher housing prices?
Much research has shown that mortgage rates exert a negative influence on housing prices. This study analyses the long- and short-run relationships between housing prices and mortgage rates using advanced nonstructural estimation methods. As expected, a bivariate specification and a four-variable housing demand specification both show that these variables have a long-run relationship, and that there is a rather inelastic response of housing prices to changes in mortgage rates. However, contrary to previous research, the results from Granger non-causality tests, impulse response functions and variance decompositions reveal that there is virtually no short-run influence from mortgage rates to housing prices.
Volume (Year): 36 (2004)
Issue (Month): 4 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAEC20|
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAEC20|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kearl, J R & Mishkin, Frederic S, 1977. "Illiquidity, the Demand for Residential Housing, and Monetary Policy," Journal of Finance, American Finance Association, vol. 32(5), pages 1571-1586, December.
- Christopher J. Mayer & C. Tsuriel Somerville, 1996. "Regional housing supply and credit constraints," New England Economic Review, Federal Reserve Bank of Boston, issue Nov, pages 39-51.
- Englund, Peter & Ioannides, Yannis M., 1997.
"House Price Dynamics: An International Empirical Perspective,"
Journal of Housing Economics,
Elsevier, vol. 6(2), pages 119-136, June.
- Englund, P. & Ioannides, Y.M., 1996. "House Price Dynamics: An International Empirical Perspective," Papers 1996-01, Uppsala - Working Paper Series.
- Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
- Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-276, March.
- David A. Dickey & Dennis W. Jansen & Daniel L. Thornton, 1991. "A primer on cointegration with an application to money and income," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 58-78. Full references (including those not matched with items on IDEAS)