Is There Evidence of Shift-Contagion in International Housing Markets?

34 Pages Posted: 15 Oct 2010

See all articles by Olivier de Bandt

Olivier de Bandt

Banque de France - Economic Study and Research Division

Sheheryar Malik

Banque de France

Date Written: October 1, 2010

Abstract

The paper attempts to provide, for housing markets, evidence of 'shift-contagion' at the international level, i.e., regime shifts in the transmission of asset prices during crisis periods. The focus is in particular on UK and Spain. We use a Markov Switching FAVAR framework and regime-dependent impulse response functions. The 'Crisis' regime which we identify endogenously is shown to also correspond to an exogenously determined index of frequency of financial crises in OECD countries, which peaked in the early 1990s and in the more recent Subprime crisis. Furthermore, we find that the response of domestic house price to a shock to a common (global) house price factor during a 'Crisis' regime is relatively more amplified than in a 'Normal' (more tranquil) regime. Less compelling evidence is found for France.

Keywords: Contagion, Housing Market, Regime Shifts, FAVAR Model

JEL Classification: R31, G15, C32

Suggested Citation

de Bandt, Olivier and Malik, Sheheryar, Is There Evidence of Shift-Contagion in International Housing Markets? (October 1, 2010). Banque de France Working Paper No. 295, Available at SSRN: https://ssrn.com/abstract=1692150 or http://dx.doi.org/10.2139/ssrn.1692150

Olivier De Bandt (Contact Author)

Banque de France - Economic Study and Research Division ( email )

31, rue Croix des Petits Champs
75049 Paris Cedex 01
FRANCE
(33 1) 42 92 28 80 (Phone)
(33 1) 42 92 27 66 (Fax)

Sheheryar Malik

Banque de France ( email )

Paris
France

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