House Price Synchronization and Financial Openness: A Dynamic Factor Model Approach

29 Pages Posted: 16 Oct 2018

Date Written: September 2018

Abstract

This paper investigates the developments in house price synchronization across countries bya dynamic factor model using a country- and city-level dataset, and examines what drives thesynchronization. The empirical results indicate that: (i) the degree of synchronization hasbeen rising since the 1970s, and (ii) a large heterogeneity in the degree of synchronizationexists across countries and cities. A panel and cross-sectional regression analysis show thatthe heterogeneity of synchronization is partly accounted for by the progress in financial andtrade openness. Also, the city-level analysis implies that the international synchronization ismainly driven by the city-level connectivity between large and international cities.

Keywords: International financial markets, Housing price, Dynamic factor model, Financial openness, Financial Aspects of Economic Integration

JEL Classification: C38, F36, G15

Suggested Citation

Katagiri, Mitsuru, House Price Synchronization and Financial Openness: A Dynamic Factor Model Approach (September 2018). Available at SSRN: https://ssrn.com/abstract=3267235 or http://dx.doi.org/10.2139/ssrn.3267235

Mitsuru Katagiri (Contact Author)

Bank of Japan ( email )

2-1-1 Nihonbashi-Hongokucho,Chuo-ku
Tokyo
Japan

HOME PAGE: http://www.boj.or.jp/en/about/index.htm/

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