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Modeling the Housing Market in OECD Countries

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  • Philip Arestis
  • Ana Rosa Gonzalez

Abstract

Recent episodes of housing bubbles, which occurred in several economies after the burst of the United States housing market, suggest studying the evolution of housing prices from a global perspective. We utilize a theoretical model for the purposes of this contribution, which identifies the main drivers of housing price appreciation—for example, income, residential investment, financial elements, fiscal policy, and demographics. In the second stage of our analysis, we test our theoretical hypothesis by means of a sample of 18 Organisation for Economic Co-operation and Development (OECD) countries from 1970 to 2011. We employ the vector error correction econometric technique in terms of our empirical analysis. This allows us to model the long-run equilibrium relationship and the short-run dynamics, which also helps to account for endogeneity and reverse-causality problems.

Suggested Citation

  • Philip Arestis & Ana Rosa Gonzalez, 2013. "Modeling the Housing Market in OECD Countries," Economics Working Paper Archive wp_764, Levy Economics Institute.
  • Handle: RePEc:lev:wrkpap:wp_764
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    References listed on IDEAS

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    1. Bharat Barot & Zan Yang, 2004. "House Prices and Housing Investment in Sweden and the UK. Econometric analysis for the period 1970-1998," Macroeconomics 0409022, EconWPA.
    2. Fuest, Clemens & Huber, Bernd & Nielsen, Søren Bo, 2006. "Capital gains taxation and house price fluctuations," Working Papers 16-2004, Copenhagen Business School, Department of Economics.
    3. Vladimir Klyuev, 2008. "What Goes Up Must Come Down? House Price Dynamics in the United States," IMF Working Papers 08/187, International Monetary Fund.
    4. Nobili, Andrea & Zollino, Francesco, 2017. "A structural model for the housing and credit market in Italy," Journal of Housing Economics, Elsevier, vol. 36(C), pages 73-87.
    5. Plamen K Iossifov & Martin Cihak & Amar Shanghavi, 2008. "Interest Rate Elasticity of Residential Housing Prices," IMF Working Papers 08/247, International Monetary Fund.
    6. Miles, David, 2012. "Demographics, house prices and mortgage design," Discussion Papers 35, Monetary Policy Committee Unit, Bank of England.
    7. Gavin Cameron & John Muellbauer, 2001. "Earnings, unemployment, and housing in Britain," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 203-220.
    8. Nneji, Ogonna & Brooks, Chris & Ward, Charles W.R., 2013. "House price dynamics and their reaction to macroeconomic changes," Economic Modelling, Elsevier, vol. 32(C), pages 172-178.
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    Cited by:

    1. Petros Sivitanides, 2015. "Macroeconomic Influences on Cyprus House Prices: 2006Q1- 2014Q2," Cyprus Economic Policy Review, University of Cyprus, Economics Research Centre, vol. 9(1), pages 3-22, June.

    More about this item

    Keywords

    Empirical Modeling; Housing Market; Vector Error Correction Modeling; OECD Countries;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • 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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