The reaction speeds of prices and transaction volume in the Finnish housing market to demand shocks
This article provides new empirical evidence on the dynamics of price movements and transaction volume in the housing market using data from Finland. While the previous related literature studies the reactions of sales volume and prices to an interest rate shock only, we investigate the responses to income and credit shocks as well. Based on an estimated vector-error correction model, the response of prices to demand shocks is found to be substantially slower than that of sales. The effect of a demand shock on sales peaks within a quarter from the shock. The results show that the differences in the reaction patterns to demand shocks can create the kind of strong positive co-movement between price movements and sales and the kind of negative correlation between price level and sales that has been found in a number of housing markets. It is also found that the direct predictive ability of the fundamentals with respect to housing price growth and sales is overwhelmed by the predictive power of the lagged observations on price changes and sales themselves.
|Date of creation:||Oct 2009|
|Date of revision:|
|Contact details of provider:|| Postal: Rehtorinpellonkatu 3, FIN-20500 TURKU|
Phone: +358 2 333 51
Web page: http://ace-economics.fi
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:tkk:dpaper:dp56. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Aleksandra Maslowska)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.