Housing and Economic Policy Uncertainty in the OECD Countries

25 Pages Posted: 26 Oct 2020

See all articles by Mehmet Balcilar

Mehmet Balcilar

University of New Haven

David Roubaud

Montpellier Business School

Gizem Uzuner

Eastern Mediterranean University

Mark E. Wohar

University of Nebraska at Omaha

Date Written: September 5, 2020

Abstract

This study is aimed at examining the dynamic relationships between housing prices return and economic policy uncertainty (EPU) using a panel vector auto-regression (PVAR) approach and annual data for a panel of 16 OECD countries over the period 2004-2018. The study includes economic growth, short-term interest rate, and population as additional covariates. Empirical results show that a positive shock to EPU leads to decrease in housing prices while the EPU shows only a weak response to housing price shocks. The results imply that EPU has robust predictive power for the housing market, implying the need for evaluating the associated risks. The panel Granger causality tests indicate strong and robust Granger causality from the EPU to housing prices, but not vice versa. The causal links also indicate that the effect of the EPU on is direct rather than indirect through other variables. Based on these outcomes, policy recommendations are made for real estate agents, portfolio managers, and policy makers.

Keywords: housing price, economic policy uncertainty, panel vector auto-regression

JEL Classification: R31, C33

Suggested Citation

Balcilar, Mehmet and Roubaud, David and Uzuner, Gizem and Wohar, Mark E., Housing and Economic Policy Uncertainty in the OECD Countries (September 5, 2020). Available at SSRN: https://ssrn.com/abstract=3687602 or http://dx.doi.org/10.2139/ssrn.3687602

Mehmet Balcilar (Contact Author)

University of New Haven ( email )

300 Boston Post Road
West Haven, CT 06516
United States

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

David Roubaud

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, 34080
France

Gizem Uzuner

Eastern Mediterranean University ( email )

Salamis Road
Gazimagusa, Via Mersin-10 99628
Turkey

Mark E. Wohar

University of Nebraska at Omaha ( email )

Department of Economics
6708 Pine Street MH 332S
Omaha, NE 68182
United States
402-554-3712 (Phone)
402-554-2853 (Fax)

HOME PAGE: http://cba.unomaha.edu/faculty/mwohar/WEB/homepage.html

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