The importance of real and nominal shocks on the UK housing market

Paresh Kumar Narayan () and Seema Narayan ()

No 2011_05, Financial Econometics Series from Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance

Abstract: The goal of this paper is to examine the responsiveness of the UK housing market to real and nominal shocks. To achieve this goal, we use a structural VAR model, based on quarterly data for the period 1957:1-2009:4. We find that in response to an interest rate shock, house prices (aggregate house price and modern house price) fall sharply over the first 4 years and do not recover to their pre-shock level. In response to a real GDP shock, both house prices react in a positive inverted U-shaped manner. Finally, we find that an inflation shock has a U-shaped negative impact on aggregate and modern house prices in the UK.

Keywords: real shock; nominal shock; UK housing market; VAR model (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec and nep-ure
Date: 2011-08-29
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Related works:
Journal Article: The Importance of Real and Nominal Shocks on the UK Housing Market (2011)
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