International Transmission Mechanisms and Contagion in Housing Markets

20 Pages Posted: 6 Jul 2016

See all articles by Anupam Nanda

Anupam Nanda

University of Reading - School of Real Estate & Planning, Henley Business School

Jia-Huey Yeh

University of Reading

Multiple version iconThere are 2 versions of this paper

Date Written: July 2016

Abstract

This paper explores international transmission mechanism and its role in contagion effect in the housing markets across six major Asian cities. The analysis is based on the identification of house price diffusion effects through a global vector autoregressive (GVAR) model estimated using quarterly data for six major 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) show 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.

Suggested Citation

Nanda, Anupam and Yeh, Jia-Huey, International Transmission Mechanisms and Contagion in Housing Markets (July 2016). The World Economy, Vol. 39, Issue 7, pp. 1005-1024, 2016, Available at SSRN: https://ssrn.com/abstract=2805268 or http://dx.doi.org/10.1111/twec.12288

Anupam Nanda (Contact Author)

University of Reading - School of Real Estate & Planning, Henley Business School ( email )

Whiteknights
Reading, Berkshire RG6 6AH
United Kingdom

Jia-Huey Yeh

University of Reading ( email )

Whiteknights
Reading, Berkshire RG6 6AH
United Kingdom

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