MACROECONOMIC UNCERTAINTY AND THE COMOVEMENT IN BUYING VERSUS RENTING IN THE USA
Goodness C. Aye and
Rangan Gupta ()
Additional contact information
Goodness C. Aye: Department of Economics, University of Pretoria, South Africa
Advances in Decision Sciences, 2019, vol. 23, issue 3, 93-121
This paper characterizes the sources of the comovement in the U.S metropolitan buy-rent growth rate. The analysis is based on quarterly buy-rent indices from 1982:Q1 to 2016:Q4. To this end, we used the dynamic factor model to decompose the index into national and local factors. The national component contributed more to the variation in the buy-rent indices relative to the local component with variance decomposition values of 72% and 27% respectively albeit this varied across the cities. We further examined the sensitivity of the national buy-rent factor to macroeconomic uncertainty. Our full sample results show that uncertainty has a significant negative effect on the buy-rent behavior thus favouring buying a home as a wealth accumulation channel and hence a hedge relative to renting a similar home and investing in other financial assets. The results from the recursive estimation further confirmed a dominant negative relationship with fewer periods of positive relationship. The implications of these findings are drawn.
Keywords: Buy-rent choice; consumer behavior; dynamic latent factor model; development; economic uncertainty (search for similar items in EconPapers)
JEL-codes: C32 C38 E21 E30 R31 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://journal.asia.edu.tw/ADS/wp-content/uploads/ ... nting-in-the-USA.pdf (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:aag:wpaper:v:23:y:2019:i:3:p:93-121
Access Statistics for this article
More articles in Advances in Decision Sciences from Asia University, Taiwan Contact information at EDIRC.
Bibliographic data for series maintained by Vincent Pan ().