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The Dynamic Relationship between House Prices and Output: Evidence from US Metropolitan Statistical Areas

Author

Listed:
  • Nicholas Apergis

    () (Department of Banking and Financial Management, University of Piraeus, Greece)

  • Beatrice D. Simo-Kengne

    () (Department of Economics, University of Pretoria)

  • Rangan Gupta

    () (Department of Economics, University of Pretoria)

  • Tsangyao Chang

    () (Department of Finance, Feng Chia University, Taichung, Taiwan)

Abstract

This paper investigates the long-run and short-term dynamics of 351 US metropolitan statistical area housing prices in relation to personal income. We apply a panel cointegration approach on annual data from 1993 to 2011 and find a long-run relationship between local house prices and per capita personal income. The causal direction is then assessed based on an autoregressive distributed lag specification that also accommodates for error-correction. Results from Granger-causality tests reveal the existence of a bi-directional causality between real house prices and real per capita personal income over both long- and short-horizons. We conclude that changes in personal income can predict house price movements and vice versa.

Suggested Citation

  • Nicholas Apergis & Beatrice D. Simo-Kengne & Rangan Gupta & Tsangyao Chang, 2013. "The Dynamic Relationship between House Prices and Output: Evidence from US Metropolitan Statistical Areas," Working Papers 201349, University of Pretoria, Department of Economics.
  • Handle: RePEc:pre:wpaper:201349
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    References listed on IDEAS

    as
    1. Nyakabawo, Wendy & Miller, Stephen M. & Balcilar, Mehmet & Das, Sonali & Gupta, Rangan, 2015. "Temporal causality between house prices and output in the US: A bootstrap rolling-window approach," The North American Journal of Economics and Finance, Elsevier, vol. 33(C), pages 55-73.
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    Cited by:

    1. repec:eee:ecmode:v:72:y:2018:i:c:p:165-176 is not listed on IDEAS
    2. Chi-Wei SU & Zong-Liang YAO & Hsu-Ling CHANG, 2016. "The relationship between output and asset prices: A time – and frequency – varying approach," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(606), S), pages 57-76, Spring.
    3. Furkan Emirmahmutoglu & Mehmet Balcilar & Nicholas Apergis & Beatrice D. Simo-Kengne & Tsangyao Chang & Rangan Gupta, 2014. "Causal relationship between asset prices and output in the US: Evidence from state-level panel Granger causality test," Working Papers 201411, University of Pretoria, Department of Economics.

    More about this item

    Keywords

    Real house prices; Real personal income per capita; Panel cointegration; Panel causality;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • 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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