Uncertainty in the housing market: evidence from US states
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Maria Christidou
Abstract
Housing is distinct from other financial assets, since it is a durable consumer good for households. Due to the irreversible nature of housing investment, uncertainty should be an important determinant of housing investment. From a theoretical point of view, though, this impact is ambiguous. This paper extends previous empirical work by employing the techniques of bivariate Generalized Autoregressive Conditional Heteroskedasticity (GARCH) models in a group of forty-eight US states. In particular, we use data on housing permits as a proxy for housing investment and the house price index for the forty-eight contiguous US states and estimate bivariate GARCH models (BEKK) for each state, in order to obtain proxies of housing investment and house price uncertainty. Moreover, we use the Economic Policy Uncertainty index as an alternative measure of uncertainty. This setup allows us to test for the impact of uncertainty on housing investment growth and house price inflation and examine whether the effects differ across the different states. In general, we find that in most states uncertainty tends to increase housing investment growth and to decrease house price inflation. The cross-state differences in results may be due to variation in the degree of speculation in housing markets.
Acknowledgments
We are grateful to an anonymous referee for very helpful comments and suggestions. The usual disclaimer applies
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Supplemental Material
The online version of this article offers supplementary material (DOI: https://doi.org/10.1515/snde-2016-0064).
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Articles in the same Issue
- Markov-switching quantile autoregression: a Gibbs sampling approach
- Uncertainty in the housing market: evidence from US states
- Exchange rate misalignment and economic growth: evidence from nonlinear panel cointegration and granger causality tests
- Causal relationships between economic policy uncertainty and housing market returns in China and India: evidence from linear and nonlinear panel and time series models
- Estimation and inference of threshold regression models with measurement errors
- The spurious effect of ARCH errors on linearity tests: a theoretical note and an alternative maximum likelihood approach
