IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Spatial and Temporal Diffusion of House Prices in the UK

  • Holly, S.
  • Pesaran, M.H.
  • Yamagata, T.

This paper provides a method for the analysis of the spatial and temporal diffusion of shocks in a dynamic system. We use changes in real house prices within the UK economy at the level of regions to illustrate its use. Adjustment to shocks involves both a region specific and a spatial effect. Shocks to a dominant region - London - are propagated contemporaneously and spatially to other regions. They in turn impact on other regions with a delay. We allow for lagged effects to echo back to the dominant region. London in turn is influenced by international developments through its link to New York and other financial centers. It is shown that New York house prices have a direct effect on London house prices. We analyse the effect of shocks using generalised spatio-temporal impulse responses. These highlight the di¤usion of shocks both over time (as with the conventional impulse responses) and over space.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.econ.cam.ac.uk/research/repec/cam/pdf/cwpe0952.pdf
Download Restriction: no

Paper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0952.

as
in new window

Length:
Date of creation: 16 Dec 2009
Date of revision:
Handle: RePEc:cam:camdae:0952
Contact details of provider: Web page: http://www.econ.cam.ac.uk/index.htm

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.:

as in new window
  1. Steve Gibbons & Stephen Machin, 2004. "Valuing Rail Access Using Transport Innovations," CEP Discussion Papers dp0611, Centre for Economic Performance, LSE.
  2. M. Hashem Pesaran & Til Schuermann & Scott M. Weiner, 2001. "Modelling regional interdependencies using a global error-correcting macroeconometric model," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 B4-1, International Conferences on Panel Data.
  3. Alexander Chudik & M. Hashem Pesaran, 2013. "Econometric Analysis of High Dimensional VARs Featuring a Dominant Unit," Econometric Reviews, Taylor & Francis Journals, vol. 32(5-6), pages 592-649, August.
  4. Bradford Case & William Goetzmann & K. Rouwenhorst, 1999. "Global Real Estate Markets: Cycles And Fundamentals," Yale School of Management Working Papers ysm20, Yale School of Management, revised 01 Jan 2001.
  5. Conley, T. G., 1999. "GMM estimation with cross sectional dependence," Journal of Econometrics, Elsevier, vol. 92(1), pages 1-45, September.
  6. Holly, Sean & Pesaran, M. Hashem & Yamagata, Takashi, 2006. "A Spatio-Temporal Model of House Prices in the US," IZA Discussion Papers 2338, Institute for the Study of Labor (IZA).
  7. Kelejian, Harry H. & Prucha, Ingmar R., 2010. "Specification and estimation of spatial autoregressive models with autoregressive and heteroskedastic disturbances," Journal of Econometrics, Elsevier, vol. 157(1), pages 53-67, July.
  8. Bernard Fingleton, 2008. "A generalized method of moments estimator for a spatial model with moving average errors, with application to real estate prices," Empirical Economics, Springer, vol. 34(1), pages 35-57, February.
  9. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  10. van Dijk, A. & Franses, Ph.H.B.F. & Paap, R. & van Dijk, D.J.C., 2007. "Modeling regional house prices," Econometric Institute Research Papers EI 2007-55, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  11. Joshua Gallin, 2006. "The Long-Run Relationship between House Prices and Income: Evidence from Local Housing Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 34(3), pages 417-438, 09.
  12. Alexander Chudik & M. Hashem Pesaran & Elisa Tosetti, 2009. "Weak and Strong Cross Section Dependence and Estimation of Large Panels," CESifo Working Paper Series 2689, CESifo Group Munich.
  13. C. Gössl & D. P. Auer & L. Fahrmeir, 2001. "Bayesian Spatiotemporal Inference in Functional Magnetic Resonance Imaging," Biometrics, The International Biometric Society, vol. 57(2), pages 554-562, 06.
  14. Ashworth, John & Parker, Simon C, 1997. "Modelling Regional House Prices in the UK," Scottish Journal of Political Economy, Scottish Economic Society, vol. 44(3), pages 225-46, August.
  15. Alexander Chudik & M. Hashem Pesaran, 2007. "Infinite Dimensional VARs and Factor Models," CESifo Working Paper Series 2176, CESifo Group Munich.
  16. Pesaran, M.H., 2004. "A Pair-wise Approach to Testing for Output and Growth Convergence," Cambridge Working Papers in Economics 0453, Faculty of Economics, University of Cambridge.
  17. Shaun Bond & Mardi Dungey & Renée Fry, 2006. "A Web Of Shocks: Crises Across Asian Real Estate Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 32(3), pages 253-274, May.
  18. Mark J. Holmes & Arthur Grimes, 2005. "Is there long-run convergence of regional house prices in the UK?," Working Papers 05_11, Motu Economic and Public Policy Research.
  19. M. Hashem Pesaran, 2004. "Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure," CESifo Working Paper Series 1331, CESifo Group Munich.
  20. Lung-Fei Lee, 2004. "Asymptotic Distributions of Quasi-Maximum Likelihood Estimators for Spatial Autoregressive Models," Econometrica, Econometric Society, vol. 72(6), pages 1899-1925, November.
  21. Horvath, Michael, 2000. "Sectoral shocks and aggregate fluctuations," Journal of Monetary Economics, Elsevier, vol. 45(1), pages 69-106, February.
  22. J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
  23. Wu, De-Min, 1973. "Alternative Tests of Independence Between Stochastic Regressors and Disturbances," Econometrica, Econometric Society, vol. 41(4), pages 733-50, July.
  24. Cameron, Gavin & Muellbauer, John, 1998. "The Housing Market and Regional Commuting and Migration Choices," Scottish Journal of Political Economy, Scottish Economic Society, vol. 45(4), pages 420-46, September.
  25. Kelejian, Harry H & Prucha, Ingmar R, 1999. "A Generalized Moments Estimator for the Autoregressive Parameter in a Spatial Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 509-33, May.
  26. Richard J. Herring & Susan Wachter, 1999. "Real Estate Booms and Banking Busts: An International Perspective," Center for Financial Institutions Working Papers 99-27, Wharton School Center for Financial Institutions, University of Pennsylvania.
  27. Michael Horvath, 1998. "Cyclicality and Sectoral Linkages: Aggregate Fluctuations from Independent Sectoral Shocks," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(4), pages 781-808, October.
  28. Pesaran, M. Hashem & Shin, Yongcheol & Smith, Richard J., 2000. "Structural analysis of vector error correction models with exogenous I(1) variables," Journal of Econometrics, Elsevier, vol. 97(2), pages 293-343, August.
  29. Jushan Bai, 2009. "Panel Data Models With Interactive Fixed Effects," Econometrica, Econometric Society, vol. 77(4), pages 1229-1279, 07.
  30. Holly, S. & Petrella, I., 2008. "Factor demand linkages and the business cycle: Interpreting aggregate fluctuations as sectoral fluctuations," Cambridge Working Papers in Economics 0827, Faculty of Economics, University of Cambridge.
  31. Clive, W.J. & Lin, Jin-Lung, 1995. "Causality in the Long Run," Econometric Theory, Cambridge University Press, vol. 11(03), pages 530-536, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cam:camdae:0952. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Howard Cobb)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.