Modeling the Housing Market in OECD Countries

Levy Economics Institute of Bard College Working Paper No. 764

26 Pages Posted: 11 May 2013

See all articles by Philip Arestis

Philip Arestis

University of Cambridge - Department of Land Economy; Universidad del País Vasco (UPV/EHU)

Ana González

Cambridge Econometrics Ltd

Date Written: May 10, 2013

Abstract

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

Arestis, Philip and González, Ana, Modeling the Housing Market in OECD Countries (May 10, 2013). Levy Economics Institute of Bard College Working Paper No. 764. Available at SSRN: https://ssrn.com/abstract=2263445 or http://dx.doi.org/10.2139/ssrn.2263445

Philip Arestis (Contact Author)

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

Universidad del País Vasco (UPV/EHU)

Barrio Sarriena s/n
Leioa, Bizkaia 48940
Spain

Ana González

Cambridge Econometrics Ltd ( email )

Reuben House
Covent Garden
Cambridge, CB1 2HT
United Kingdom

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