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What’s the Beef with House Prices? Economic Shocks and Local Housing Markets

Author

Listed:
  • Arthur Grimes

    (Motu Economic & Public Policy Research)

  • Andrew Aitken

    (Motu Economic & Public Policy Research)

Abstract

We examine the impact of shocks on community outcomes. The shocks that we examine are exogenous economic shocks which occur externally to the local community, and which are hypothesised to impact on the community. By testing the impact of these shocks on community developments, we enrich understanding of what causes communities to develop as they do over time. In particular, we gain a greater understanding of the impact of factors largely or wholly outside the control of local communities which lead to inequality in outcomes between communities. To focus our analysis, we concentrate on the price of houses within each community as the community outcome variable. The local price of houses summarises, in one dimension, a host of tangible and intangible components relating to the community of interest. We use a multivariate panel structure to estimate the long-run and short-run impacts of price, production and demographic variables on real house prices.

Suggested Citation

  • Arthur Grimes & Andrew Aitken, 2005. "What’s the Beef with House Prices? Economic Shocks and Local Housing Markets," Urban/Regional 0509011, EconWPA.
  • Handle: RePEc:wpa:wuwpur:0509011
    Note: Type of Document - pdf; pages: 29
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    References listed on IDEAS

    as
    1. Timothy J. Bartik, 2003. "Local Economic Development Policies," Upjohn Working Papers and Journal Articles 03-91, W.E. Upjohn Institute for Employment Research.
    2. Fabling, Richard & Grimes, Arthur, 2005. "Insolvency and economic development: Regional variation and adjustment," Journal of Economics and Business, Elsevier, vol. 57(4), pages 339-359.
    3. Arthur Grimes & Suzi Kerr & Andrew Aitken, 2003. "Housing and Economic Adjustment," Working Papers 03_09, Motu Economic and Public Policy Research.
    4. Brendan O'Donovan & David Rae, 1997. "The determinants of house prices in New Zealand: An aggregate and regional analysis," New Zealand Economic Papers, Taylor & Francis Journals, vol. 31(2), pages 175-198.
    5. Arthur Grimes & Andrew Aitken & Suzi Kerr, 2004. "House Price Efficiency: Expectations, Sales, Symmetry," Urban/Regional 0408001, EconWPA.
    6. Timothy J. Bartik, 1991. "Who Benefits from State and Local Economic Development Policies?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number wbsle, November.
    7. Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May.
    8. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    9. Dean R. Hyslop & David C. Maré, 2003. "Understanding New Zealand's Changing Income Distribution 1983-98: A Semiparametric Analysis," Working Papers 03_16, Motu Economic and Public Policy Research.
    10. Suzi Kerr & Andrew Aitken & Arthur Grimes, 2004. "Land Taxes and Revenue Needs as Communities Grow and Decline: Evidence from New Zealand," Working Papers 04_01, Motu Economic and Public Policy Research.
    11. Dave Maré & Jason Timmins, 2003. "Moving to Jobs?," Labor and Demography 0309003, EconWPA.
    12. Edward L. Glaeser & Joseph Gyourko & Raven Saks, 2003. "Why is Manhattan So Expensive? Regulation and the Rise in House Prices," Harvard Institute of Economic Research Working Papers 2020, Harvard - Institute of Economic Research.
    13. Suzi Kerr, 2003. "Indigenous Forests and Forest Sink Policy in New Zealand," Working Papers 03_15, Motu Economic and Public Policy Research.
    14. Edward L. Glaeser & Joseph Gyourko, 2003. "The impact of building restrictions on housing affordability," Economic Policy Review, Federal Reserve Bank of New York, issue Jun, pages 21-39.
    15. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
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    Citations

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    Cited by:

    1. Grimes, Arthur, 2005. "Regional and industry cycles in Australasia: Implications for a common currency," Journal of Asian Economics, Elsevier, vol. 16(3), pages 380-397, June.
    2. Andrew Coleman & Grant Scobie, 2009. "A Simple Model of Housing Rental and Ownership with Policy Simulations," Working Papers 09_08, Motu Economic and Public Policy Research.
    3. Arthur Grimes, 2005. "Intra & Inter-Regional Industry Shocks: A New Metric with an Application to Australasian Currency Union," Macroeconomics 0509019, EconWPA.
    4. Arthur Grimes & Andrew Aitken, 2010. "Housing Supply, Land Costs and Price Adjustment," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 38(2), pages 325-353.
    5. Arthur Grimes & Andrew Aitken, 2006. "Housing Supply and Price Adjustment," Working Papers 06_01, Motu Economic and Public Policy Research.
    6. Arthur Grimes & Mark Holmes, 2010. "New Zealand Housing Markets: Just a Bit-Player in the A-League?," Working Papers 10_07, Motu Economic and Public Policy Research.
    7. Michelle Poland & David C Maré, 2005. "Defining Geographic Communities," Urban/Regional 0509016, EconWPA.
    8. Arthur Grimes & Suzi Kerr & Andrew Aitken, 2004. "Bi-Directions Impacts of Economic, Social and Environmental Changes and the New Zealand Housing Market," Working Papers 04_09, Motu Economic and Public Policy Research.
    9. Arthur Grimes & Robert Sourell & Andrew Aitken, 2005. "Regional Variation in Rental Costsfor Larger Households," Urban/Regional 0509014, EconWPA.
    10. David C Maré, 2005. "Indirect Effects of Active Labour Market Policies," HEW 0509004, EconWPA.
    11. Arthur Grimes & David C. Maré & Melanie Morten, 2007. "Adjustment in Local Labour and Housing Markets," Working Papers 07_10, Motu Economic and Public Policy Research.

    More about this item

    Keywords

    House prices; commodity prices; regional shocks; adjustment dynamics;

    JEL classification:

    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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