Spatial and Temporal Diffusion of House Prices in the UK

Sean Holly, Mohammad Pesaran and Takashi Yamagata

No 4694, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper provides a method for the analysis of the spatial and temporal diffusion of shocks in a dynamic system. We use changes in real house prices within the UK economy at the level of regions to illustrate its use. Adjustment to shocks involves both a region specific and a spatial effect. Shocks to a dominant region – London – are propagated contemporaneously and spatially to other regions. They in turn impact on other regions with a delay. We allow for lagged effects to echo back to the dominant region. London in turn is influenced by international developments through its link to New York and other financial centers. It is shown that New York house prices have a direct effect on London house prices. We analyse the effect of shocks using generalised spatio-temporal impulse responses. These highlight the diffusion of shocks both over time (as with the conventional impulse responses) and over space.

Keywords: spatial dependence; cross sectional dependence; house prices (search for similar items in EconPapers)
JEL-codes: C21 C23 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2010-01
New Economics Papers: this item is included in nep-eec, nep-eur, nep-geo and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Published - published as 'The spatial and temporal diffusion of house prices in the UK ' in: Journal of Urban Economics, 2011, 69 (1), 2-23

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Related works:
Journal Article: The spatial and temporal diffusion of house prices in the UK (2011)
Working Paper: Spatial and Temporal Diffusion of House Prices in the UK (2010)
Working Paper: Spatial and Temporal Diffusion of House Prices in the UK (2009)
Working Paper: Spatial and Temporal Diffusion of House Prices in the UK
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