Economic policy uncertainty and housing returns in Germany: Evidence from a bootstrap rolling window

David Su (), Xin Li (), Oana-Ramona Lobonþ () and Yanping Zhao ()
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David Su: Department of Finance, Ocean University of China, Shandong, China
Xin Li: Department of Finance, Ocean University of China, Shandong, China
Oana-Ramona Lobonþ: Department of Finance, West University of Timisoara, Timisoara, Romania
Yanping Zhao: Department of International Trade, Ocean University of China, Shandong, China

Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, 2016, vol. 34, issue 1, 43-61

Abstract: The purpose of this investigation is to research the causal link between economic policy uncertainty (EPU) and the housing returns (HR) in Germany. In the estimated vector autoregressive models, we test its stability and find the short-run relationship between HR and EPU is unstable. As a result, a time-varying approach (bootstrap rolling window causality test) is utilized to revisit the dynamic causal link, and we find EPU has no impact on HR due to the stability of the real estate market in Germany. HR does not have significant effects on EPU in most time periods. However, significant feedback in several sub-periods (both positive and negative) are found from HR to EPU, which indicates the causal link from HR to EPU varies over time. The empirical results do not support the general equilibrium model of government policy choices that indicate EPU does not play a role in the real estate market. The basic conclusion is that the real estate market shows its stability due to the social welfare nature and the rational institutional arrangement of the real estate in Germany, and the real estate market also shows its importance that it has significant effect on the economic policy choice in some periods when negative external shocks occur.

Keywords: housing returns; Economic Policy Uncertainty; time-varying causality (search for similar items in EconPapers)
JEL-codes: C32 G12 G18 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (6)

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