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Does Economic Policy Uncertainty Forecast Real Housing Returns in a Panel of OECD Countries? A Bayesian Approach

Author

Listed:
  • Christina Christou

    () (School of Economics and Management, Open University of Cyprus, 2252, Latsia, Cyprus)

  • Rangan Gupta

    () (Department of Economics, University of Pretoria)

  • Christis Hassapis

    () (Department of Economics, University of Cyprus, P.O. Box 20537, CY-1678 Nicosia, Cyprus)

Abstract

This paper investigates whether the news-based measure of economic policy uncertainty (EPU) could help in forecasting the real housing returns in ten (Canada, France, Germany, Italy, Japan, The Netherlands, South Korea, Spain, United Kingdom, and United States of America) Organization for Economic Co-operation and Development (OECD) countries. We analyze the quarterly out-of-sample period of 2008:Q2-2014:Q4, given an in-sample period of 2003:Q1- 2008:1Q1, using time series and panel data-based vector autoregressive models, with the latter allowing for heterogeneity, and static and dynamic interdependence. It is found that regardless of the forecasting model considered, EPU is useful for forecasting real housing returns. Our results show that, panel data models, especially the Bayesian variants which allow for parameter shrinkage, consistently beat time series autoregressive models suggesting the importance of pooling information when trying to forecast real housing returns.

Suggested Citation

  • Christina Christou & Rangan Gupta & Christis Hassapis, 2016. "Does Economic Policy Uncertainty Forecast Real Housing Returns in a Panel of OECD Countries? A Bayesian Approach," Working Papers 201637, University of Pretoria, Department of Economics.
  • Handle: RePEc:pre:wpaper:201637
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:ecolet:v:180:y:2019:i:c:p:15-20 is not listed on IDEAS
    2. Goodness C. Aye & Rangan Gupta, 2018. "Macroeconomic Uncertainty and the Comovement in Buying versus Renting in the United States," Working Papers 201832, University of Pretoria, Department of Economics.
    3. repec:eee:intfin:v:55:y:2018:i:c:p:134-150 is not listed on IDEAS
    4. Christou, Christina & Gupta, Rangan & Nyakabawo, Wendy, 2019. "Time-varying impact of uncertainty shocks on the US housing market," Economics Letters, Elsevier, vol. 180(C), pages 15-20.
    5. repec:eee:ecofin:v:45:y:2018:i:c:p:245-265 is not listed on IDEAS

    More about this item

    Keywords

    Real Housing Returns; Economic Policy Uncertainty; OECD Countries; Panel Vector Autoregressions;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • 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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