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The Nonlinear House Price Adjustment Process in Developed and Transition Countries

Author

Listed:
  • Petra Posedel

    () (Graduate School of Economics and Business, Zagreb)

  • Maruska Vizek

    () (The Institute of Economics, Zagreb)

Abstract

We use a nonlinear framework in order to explore house price determinants and their adjustment properties. We test for threshold cointegration using a sample of four developed countries (the United States, the United Kingdom, Spain, and Ireland) and four transition countries (Bulgaria, Croatia, the Czech Republic, and Estonia). All eight countries experienced an intensive increase in house prices during the 1990s and the first half of this decade. In addition to testing for nonlinearities, we focus on house price determinants in these four transition countries of Central and Eastern Europe. An asymmetric house price adjustment is present in all transition countries and the U.S., while no threshold effects are detected in developed European countries. In a threshold error correction framework, house prices are aligned with the fundamentals; but house price persistence coupled with a slow and asymmetric house price adjustment process might have facilitated the house price boom in transition countries and the U.S.

Suggested Citation

  • Petra Posedel & Maruska Vizek, 2010. "The Nonlinear House Price Adjustment Process in Developed and Transition Countries," Working Papers 1001, The Institute of Economics, Zagreb.
  • Handle: RePEc:iez:wpaper:1001
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    Cited by:

    1. Ksenija Dumičić & Anita Časni & Irena Palić, 2013. "The short-run and long-run behaviour of personal consumption in Croatia," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 21(1), pages 3-11, June.
    2. Adrienne Mack & Enrique Martínez-García, 2011. "A cross-country quarterly database of real house prices: a methodological note," Globalization and Monetary Policy Institute Working Paper 99, Federal Reserve Bank of Dallas.
    3. Amina Ahec Šonje & Anita Ceh Casni & Maruška Vizek, 2012. "Does housing wealth affect private consumption in European post-transition countries? Evidence from linear and threshold models," Post-Communist Economies, Taylor & Francis Journals, vol. 24(1), pages 73-85, June.
    4. Luis A. Gil-Alana & Goodness C. Aye & Rangan Gupta, 2012. "Testing for Persistence with Breaks and Outliers in South African House Prices," Working Papers 201233, University of Pretoria, Department of Economics.
    5. Mei-Se Chien, 2013. "The Non-linear Ripple Effect of Housing Prices in Taiwan: A Smooth Transition Regressive Model," ERES eres2013_51, European Real Estate Society (ERES).

    More about this item

    Keywords

    house prices; threshold cointegration; asymmetric adjustment; transition;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • 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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