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Testing for Bubbles in Housing Markets: New Results Using a New Method

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  • José Eduardo Gómez

    ()

  • Jair Ojeda Ojeda

    ()

  • Catalina Rey Guerra

    ()

  • Natalia Sicard

    ()

Abstract

In the context of financial crises influenced by the development and burst of housing price bubbles, the detection of exuberant behaviors in the financial market and the implementation of early warning diagnosis tests are of vital importance. This paper applies the new method developed by Phillips et al (2012) for detecting bubbles in the Colombian residential property market. The empirical results suggest that currently the country could be experiencing a price bubble, when the CPI and the housing rent index are used as deflators. We do not check the robustness of these results to alternative deflators, such as a household income index and a land price index, due to the lack of monthly data on these indicators

Suggested Citation

  • José Eduardo Gómez & Jair Ojeda Ojeda & Catalina Rey Guerra & Natalia Sicard, 2013. "Testing for Bubbles in Housing Markets: New Results Using a New Method," BORRADORES DE ECONOMIA 010456, BANCO DE LA REPÚBLICA.
  • Handle: RePEc:col:000094:010456
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    References listed on IDEAS

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    1. Kenneth D. West, 1987. "A Specification Test for Speculative Bubbles," The Quarterly Journal of Economics, Oxford University Press, vol. 102(3), pages 553-580.
    2. 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.
    3. Peter C. B. Phillips & Yangru Wu & Jun Yu, 2011. "EXPLOSIVE BEHAVIOR IN THE 1990s NASDAQ: WHEN DID EXUBERANCE ESCALATE ASSET VALUES?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(1), pages 201-226, February.
    4. Diba, Behzad T & Grossman, Herschel I, 1988. "Explosive Rational Bubbles in Stock Prices?," American Economic Review, American Economic Association, vol. 78(3), pages 520-530, June.
    5. Natalia Salazar & Roberto Steiner & Alejandro Becerra & Jaime Ramírez, 2013. "Los efectos del precio del suelo sobre el precio de la vivienda para Colombia," Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 31(70), pages 18-66.
    6. Shiller, Robert J, 1981. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," American Economic Review, American Economic Association, vol. 71(3), pages 421-436, June.
    7. Evans, George W, 1991. "Pitfalls in Testing for Explosive Bubbles in Asset Prices," American Economic Review, American Economic Association, vol. 81(4), pages 922-930, September.
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    Cited by:

    1. Gustavo Adolfo HERNANDEZ DIAZ & Gabriel PIRAQUIVE GALEANO, 2014. "Evolución de los precios de la vivienda en Colombia," ARCHIVOS DE ECONOMÍA 011208, DEPARTAMENTO NACIONAL DE PLANEACIÓN.
    2. Sergio Cerezo Aguirre, 2014. "Boom en el sector inmobiliario en Bolivia: ¿burbuja o fundamentos económicos?," Revista de Análisis del BCB, Banco Central de Bolivia, vol. 20(1), pages 75-118, June.
    3. Vanessa Cediel Sánchez & Carlos Velásquez Vega, 2015. "¿Hay una burbuja inmobiliaria en Bogotá? Un estudio por segmentos de mercado," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 17(32), pages 233-357, January-J.
    4. repec:bla:sajeco:v:85:y:2017:i:1:p:52-67 is not listed on IDEAS
    5. repec:rss:jnljee:v5i1p3 is not listed on IDEAS

    More about this item

    Keywords

    C22; G12; R31;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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