Explosive bubbles in house prices? Evidence from the OECD countries

Engsted, Tom; Hviid, Simon Juul; Pedersen, Thomas

doi:10.1016/j.intfin.2015.07.006

Cited by 111 publications

(54 citation statements)

References 41 publications

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“…Similarly Taipalus (2006) applies unit root tests to the rent to price ratio for Finland, the United States, the United Kingdom, Spain, and Germany and concludes that, under the assumption that rent growth rates and expected returns are stationary, a bubble existed in nearly all markets. In this paper I implement an empirical strategy that was recently used by for the US housing market, Yiu et al (2013) for the Hong Kong local property market, Engsted et al (2014) for housing markets in OECD countries, and by Pavlidis et al (2013) to study data from the Dallas FED International House Price Database. , This study also relates to studies by Dovman et al (2012) and Nagar and Segal (2010) that empirically assess recent developments in the Israeli housing market.…”

Section: Introductionmentioning

confidence: 99%

Testing for a Housing Bubble at the National and Regional Level: The Case of Israel

Caspi¹

2015

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Between 2008 and 2013, home prices in Israel appreciated by roughly 50 percent in real terms, with increases of nearly 60 percent in some regions. This paper examines whether this phenomenon reflects the presence of a national or regional housing bubble by applying econometric tests for explosive behavior to quality adjusted national and regional level data on the home price to rent ratio, while controlling for various fundamental factors, including interest rates, income and the leverage ratio. Overall, study results indicate that the recent housing price appreciations at the national and regional levels are consistent with the developments of the fundamentals -supply and demand factors that are represented by rent payments and interest rates -and not with a housing bubble scenario. Most of the results are robust to a variety of tests and alternate specifications. The framework I provide to study the Israeli case may be applied to study other housing markets facing similar developments.

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Section: Introductionmentioning

confidence: 99%

Testing for a Housing Bubble at the National and Regional Level: The Case of Israel

Caspi¹

2015

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“…Furthermore, 8 See also Giglio et al (2016), who find no evidence of bubbles that violate the transversality condition in housing markets in the U.K. and Singapore. Also see Engsted et al (2016) who provide econometric evidence for explosive housing bubbles in OECD countries.…”

Section: Comparative Staticsmentioning

confidence: 99%

Regressive Welfare Effects of Housing Bubbles

Graczyk¹,

Phan²

2018

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We analyze the welfare effects of asset bubbles in a model with income inequality and financial friction. We show that a bubble that emerges in the value of housing, a durable asset that is fundamentally useful for everyone, has regressive welfare effects.By raising the housing price, the bubble benefits high-income savers but negatively affects low-income borrowers. The key intuition is that, by creating a bubble in the market price, savers' demand for the housing asset for investment purposes imposes a negative externality on borrowers, who only demand the housing asset for utility purposes. The model also implies a feedback loop: high income inequality depresses the interest rates, facilitating the existence of housing bubbles, which in turn have regressive welfare effects.

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“…These studies apply the GSADF on international housing prices (Engsted et al, 2016;Pavlidis et al, 2014;, Real Estate Investment Trust (REIT) indices (Escobari and Jafarinejad, 2015), alternative energy stock prices (Bohl et al, 2015), oil prices (Caspi et al, 2015), the nominal Sterling-dollar exchange rate (Bettendorf and Chen, 2013), the Chinese RMB-dollar exchange rate (Jiang et al 2015) and the Bitcoin market (Cheung et al 2015). …”

Section: B Applications Of the Gsadf Procedures To Identify Bubblesmentioning

confidence: 99%

Quantitative Easing and Exuberance in Government Bond Markets: Evidence from the ECB's Expanded Asset Purchase Program

2017

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SUMMARY -This paper examines whether the ECB's Quantitative Easing (QE) policy is causing government bond prices to deviate from their fundamental value.We use a recent advance in the methodology to measure exuberant price behavior in financial time series introduced by Phillips et al. (2015). We extend this methodology and apply it to government bond prices. The results show that the QE policy substantially inflated government bond prices in Euro Area countries to such an extent that bond prices are no longer in line with the underlying fundamental value. We argue that careful monitoring is required when the QE policy is eventually reversed. The test procedure outlined in this paper provides a monitoring tool to do so.JEL-code -G12; G15; E52

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Explosive bubbles in house prices? Evidence from the OECD countries

Cited by 111 publications

References 41 publications

Testing for a Housing Bubble at the National and Regional Level: The Case of Israel

Testing for a Housing Bubble at the National and Regional Level: The Case of Israel

Regressive Welfare Effects of Housing Bubbles

Quantitative Easing and Exuberance in Government Bond Markets: Evidence from the ECB's Expanded Asset Purchase Program

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