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A dynamic factor model for forecasting house prices in Belgium

Author

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  • Marina Emiris

    () (Economics and Research Department, National Bank of Belgium)

Abstract

The paper forecasts the residential property price index in Belgium with a dynamic factor model (DFM) estimated with a dataset of macro-economic variables describing the Belgian and euro area economy. The model is validated with out-of-sample forecasts which are obtained recursively over an expanding window over the period 2000q1-2012q4. We illustrate how the model reads information from mortgage loans, interest rates, GDP and inflation to revise the residential property price forecast as a result of a change in assumptions for the future paths of these variables

Suggested Citation

  • Marina Emiris, 2016. "A dynamic factor model for forecasting house prices in Belgium," Working Paper Research 313, National Bank of Belgium.
  • Handle: RePEc:nbb:reswpp:201611-313
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    File URL: https://www.nbb.be/doc/oc/repec/reswpp/wp313en.pdf
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    Keywords

    dynamic factor model; conditional forecast; house prices;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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