International Transmission Mechanisms and Contagion in Housing Markets
34 Pages Posted: 7 Apr 2014 Last revised: 23 Apr 2014
Date Written: April 5, 2014
This paper explores the house price diffusion effects across six major Asian cities. The analysis is based on macroeconomic and international transmission mechanisms and a Global Vector Auto-Regression (GVAR) model estimated using quarterly data for six Asian cities (Hong Kong, Tokyo, Seoul, Singapore, Taipei and Bangkok) from 1991Q1 to 2011Q2. The empirical results indicate that the open economies heavily relying on international trade such as Singapore, Japan (Tokyo), Taiwan (Taipei) and Thailand (Bangkok) shows positive correlations between the economy’s openness and house prices, which is consistent with the Balassa-Samuelson hypothesis. Interestingly, some region-specific conditions also appear to play important roles as determinants of house price movements, which may be driven by restrictive housing policies and demand-supply imbalances such as Singapore and Bangkok. These results are reasonably robust across several model specifications. The findings bear significant implications for formulation of investment strategy and public policies.
Keywords: House Price, International Transmission, Spill-over, GVAR
JEL Classification: F41, F42, G15, R23
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