Modeling the Housing Market in OECD Countries
Levy Economics Institute of Bard College Working Paper No. 764
26 Pages Posted: 11 May 2013
Date Written: May 10, 2013
Recent episodes of housing bubbles, which occurred in several economies after the burst of the United States housing market, suggest studying the evolution of housing prices from a global perspective. We utilize a theoretical model for the purposes of this contribution, which identifies the main drivers of housing price appreciation — for example, income, residential investment, financial elements, fiscal policy, and demographics. In the second stage of our analysis, we test our theoretical hypothesis by means of a sample of 18 Organisation for Economic Co-operation and Development (OECD) countries from 1970 to 2011. We employ the vector error correction econometric technique in terms of our empirical analysis. This allows us to model the long-run equilibrium relationship and the short-run dynamics, which also helps to account for endogeneity and reverse-causality problems.
Keywords: Empirical Modeling, Housing Market, Vector Error Correction Modeling, OECD Countries
JEL Classification: C22, R31
Suggested Citation: Suggested Citation