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The changing role of house price dynamics over the business cycle

Listed author(s):
  • Dufrénot, G.
  • Malik, S.

In this paper, we attempt to analyse the relationship between house price developments and the business cycle. Employing a time-varying transition probability Markov switching framework, we provide empirical evidence that house price growth may prove a useful leading indicator for turning point detection. In focusing on three countries, the US, UK and Spain, we furthermore provide evidence that although potentially informative from an overall perspective in business cycle modelling, the signi.cance of signals contained in house prices may not be symmetric across the identi.ed high growth and low growth states. In addition, we suggest a possible range of values for house price de.ation which may trigger a recession the following period.

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File URL: https://publications.banque-france.fr/sites/default/files/medias/documents/working-paper_309_2010.pdf
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Paper provided by Banque de France in its series Working papers with number 309.

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Length: 22 pages
Date of creation: 2010
Handle: RePEc:bfr:banfra:309
Contact details of provider: Postal:
Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS

Web page: http://www.banque-france.fr/

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  12. Patrick Honohan, 2008. "Discussion of 'Financial innovation and European housing and mortgage markets', by David Miles and Vladimir Pillonca," Oxford Review of Economic Policy, Oxford University Press, vol. 24(1), pages 176-179, spring.
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  17. repec:cmf:wpaper:wp2006_0603 is not listed on IDEAS
  18. Philip Lowe & Claudio Borio, 2002. "Asset prices, financial and monetary stability: exploring the nexus," BIS Working Papers 114, Bank for International Settlements.
  19. Ceron, Jose A. & Suarez, Javier, 2006. "Hot and Cold Housing Markets: International Evidence," CEPR Discussion Papers 5411, C.E.P.R. Discussion Papers.
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  21. Albert, James H & Chib, Siddhartha, 1993. "Bayes Inference via Gibbs Sampling of Autoregressive Time Series Subject to Markov Mean and Variance Shifts," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(1), pages 1-15, January.
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  25. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
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  27. McQueen, Grant & Thorley, Steven, 1993. "Asymmetric business cycle turning points," Journal of Monetary Economics, Elsevier, vol. 31(3), pages 341-362, June.
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  29. Vargas-Silva, Carlos, 2008. "Monetary policy and the US housing market: A VAR analysis imposing sign restrictions," Journal of Macroeconomics, Elsevier, vol. 30(3), pages 977-990, September.
  30. Kiefer, Nicholas M, 1978. "Discrete Parameter Variation: Efficient Estimation of a Switching Regression Model," Econometrica, Econometric Society, vol. 46(2), pages 427-434, March.
  31. Ferrara, L. & Vigna, O., 2009. "Cyclical relationships between GDP and housing market in France: Facts and factors at play," Working papers 268, Banque de France.
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  34. David Miles & Vladimir Pillonca, 2008. "Financial innovation and European housing and mortgage markets," Oxford Review of Economic Policy, Oxford University Press, vol. 24(1), pages 145-175, spring.
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