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Testing for rational bubbles in Australian housing market from a long-term perspective

Author

Listed:
  • Vicente Esteve

    (Universidad de Valencia and Universidad de Alcalá, Spain)

  • María A. Prats

    (Universidad de Murcia, Spain)

Abstract

In this article, we use tests of explosive behavior in real house prices with annual data for the case of Australia for the period 1870?2020. The main contribution of this paper is the use of very long time series. It is important to use longer span data because it o¤ers more powerful econo- metric results. In order to detect episodes of potential explosive behavior in house prices over this long period, we use the recursive unit root tests for explosiveness proposed by Phillips, Wu, and Yu (2011), and Phillips, Shi, and Yu (2015a,b). According to the results, there is clear specula- tive bubble behavior in real house prices between 1997-2020, speculative process that has not yet been adjusted.

Suggested Citation

  • Vicente Esteve & María A. Prats, 2021. "Testing for rational bubbles in Australian housing market from a long-term perspective," Working Papers 2113, Department of Applied Economics II, Universidad de Valencia.
  • Handle: RePEc:eec:wpaper:2113
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    More about this item

    Keywords

    House price; Explosiveness; Recursive unit root test; Multiple Structural Breaks;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • R39 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other

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