Housing Network Connectedness and Policy Spillovers: Evidence from a Time-Varying Parameter VAR Approach

Onur Polat (), Hardik Marfatia (), Christophe Andre () and Rangan Gupta ()
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Onur Polat: Hacettepe University, Informatics Institute 06800 Beytepe, Ankara, Turkiye
Hardik Marfatia: Department of Economics, Northeastern Illinois University, 5500 N. St. Louis Ave, Chicago 60625, USA
Christophe Andre: Economics Department, Organisation for Economic Co-operation and Development (OECD), 75775 Paris, Cedex 16, France
Rangan Gupta: Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa

No 202630, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper examines time-varying connectedness and volatility spillovers between housing markets and macroeconomic policy conditions, with particular emphasis on the role of housing deregulation. Using daily data from September 2007 to May 2026, we estimate a 15-node TVP-VAR network comprising housing volatility series for ten major U.S. metropolitan areas alongside five policy and financial indicators: the housing deregulation index, economic policy uncertainty (EPU), a spliced monetary policy proxy (Effective Federal Funds Rate/Krippner Shadow Short Rate), the Aruoba-Diebold-Scotti (ADS) business conditions index, and the 5-year breakeven inflation rate (T5YIE). Volatility inputs are filtered using a multivariate GJR-GARCH model augmented with time-varying skewness and kurtosis (GJRSK), and parameters are estimated within a Bayesian prior (BayesPrior) framework. The Total Connectedness Index reveals a counter-cyclical network topology, peaking during the 2008 financial crisis, the 2020 pandemic, and the 2024 monetary pivot. Pairwise decompositions reveal pronounced heterogeneity across cities: supply-inelastic coastal market, New York (peak spillover 45.5%), San Diego (48.8%), and San Francisco (39.8%), absorb the largest regulatory shocks, while deregulation also transmits persistently to monetary policy conditions (Shadow Short Rate positive in 87.7% of observations), real activity, and inflation expectations. These findings carry direct implications for macroprudential policy design and institutional portfolio risk management in the U.S. housing sector.

Keywords: Housing Volatility Networks, Housing Deregulation; TVP-VAR, Net Pairwise Spillovers, GJRSK Volatility, BayesPrior (search for similar items in EconPapers)
JEL-codes: C32 G10 R31 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2026-09
New Economics Papers: this item is included in nep-hre
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