Temporal Causality between House Prices and Output in the U.S.: A Bootstrap Rolling-Window Approach

North American Review of Economics and Finance, July 2015

30 Pages Posted: 2 Jul 2013 Last revised: 31 Aug 2016

See all articles by Wendy Nyakabawo

Wendy Nyakabawo

University of Pretoria

Stephen M. Miller

University of Nevada, Las Vegas - Department of Economics; University of Connecticut - Department of Economics

Mehmet Balcilar

Eastern Mediterranean University

Sonali Das

CSIR

Rangan Gupta

University of Pretoria - Department of Economics

Date Written: July 1, 2013

Abstract

This paper examines the causal relationships between the real house price index and real GDP per capita in the U.S., using the bootstrap Granger (temporal) non-causality test and a fixed-size rolling-window estimation approach. We use quarterly time-series data on the real house price index and real GDP per capita, covering the period 1963:Q1 to 2012:Q2. The full-sample bootstrap non-Granger causality test result suggests the existence of a unidirectional causality running from the real house price index to real GDP per capita. A wide variety of tests of parameter constancy used to examine the stability of the estimated vector autoregressive (VAR) models indicate short- and long-run instability. This suggests that we cannot rely on the full-sample causality tests and, hence, this warrants a time-varying (bootstrap) rolling-window approach to examine the causal relationship between these two variables. Using a rolling window size of 28 quarters, we find that while causality from the real house price to real GDP per capita occurs frequently, significant, but less frequent, evidence of real GDP per capita causing the real house price also occurs. These results imply that while the real house price leads real GDP per capita, in general (both during expansions and recessions), significant feedbacks also exist from real GDP per capita to the real house price.

Keywords: real house price, real GDP per capita, Bootstrap, time-varying causality

JEL Classification: C32, E32, R31

Suggested Citation

Nyakabawo, Wendy and Miller, Stephen M. and Balcilar, Mehmet and Das, Sonali and Gupta, Rangan, Temporal Causality between House Prices and Output in the U.S.: A Bootstrap Rolling-Window Approach (July 1, 2013). North American Review of Economics and Finance, July 2015. Available at SSRN: https://ssrn.com/abstract=2288193 or http://dx.doi.org/10.2139/ssrn.2288193

Wendy Nyakabawo

University of Pretoria ( email )

Physical Address Economic and Management Sciences
Pretoria, Gauteng 0002
South Africa

Stephen M. Miller (Contact Author)

University of Nevada, Las Vegas - Department of Economics ( email )

4505 S. Maryland Parkway
Box 456005
Las Vegas, NV 89154
United States
702-895-3776 (Phone)
702-895-1354 (Fax)

HOME PAGE: http://faculty.unlv.edu/smiller/

University of Connecticut - Department of Economics

365 Fairfield Way, U-1063
Storrs, CT 06269-1063
United States

Mehmet Balcilar

Eastern Mediterranean University ( email )

Gazimagusa
Turkey

HOME PAGE: http://www.mbalcilar.net

Sonali Das

CSIR ( email )

P. O. Box 395
Brummeria
Pretoria, 0001
South Africa

Rangan Gupta

University of Pretoria - Department of Economics ( email )

Lynnwood Road
Hillcrest
Pretoria, 0002
South Africa

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