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An alternative method for identifying booms and busts in the Euro area housing market

Listed author(s):
  • Dieter Gerdesmeier
  • Andreja Lenarčič
  • Barbara Roffia

This article develops a model-based method to detect booms and busts in the Euro area housing market. A model is constructed and tested, whereby the user cost rate, a demographic variable, unemployment rate, disposable income, debt-to-income ratio and housing stock are fundamental variables significantly explaining house price (HP) developments. Booms/busts are identified as episodes when the HP index exceeds the levels implied by those economic fundamentals. Furthermore, a cross-check with boom/bust episodes based on other methods is carried out to substantiate the results, while the ability of the model in predicting booms/busts in real time is also tested.

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File URL: http://hdl.handle.net/10.1080/00036846.2014.975328
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Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 47 (2015)
Issue (Month): 5 (January)
Pages: 499-518

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Handle: RePEc:taf:applec:v:47:y:2015:i:5:p:499-518
DOI: 10.1080/00036846.2014.975328
Contact details of provider: Web page: http://www.tandfonline.com/RAEC20

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