Dynamic relations between housing Markets, stock Markets, and uncertainty in global Cities: A Time-Frequency approach

Huthaifa Alqaralleh, Alessandra Canepa and Gazi Salah Uddin

The North American Journal of Economics and Finance, 2023, vol. 68, issue C

Abstract: This paper considers the dynamic features of housing prices in metropolises that are characterised by a high degree of internationalisation. Using the wavelet coherency procedure, the degree of co-movement and causality between housing, stock markets, and macroeconomic uncertainty are investigated. In addition, the existence of volatility spillover across housing markets is assessed in the time–frequency domain using a novel procedure that involves combining the wavelet decomposition with a time varying parameter vector autoregression model. The results highlight that the clustering of global business in a limited number of metropolises that act as “global hubs” leaves the local housing markets exposed to international shocks and volatility spillover. The empirical analysis suggests that the correlations between real estate and stock markets from one side, and real estates and uncertainty on the other side, intensify during the turmoil periods. Causality and co-movement relationships appear predominately in the medium and long run periods. The evidence presented in this paper suggests that policymakers cannot ignore the possibility that international shocks to housing markets may affect the domestic markets. In this respect, macroprudential policy tools may target tapering off the unintended effects of housing market globalisation such as house price shock synchronisation, especially when these shocks take place in cities that are also major financial centres.

Keywords: Global Cities; Global Economic Policy Uncertainty Index; Wavelet-Time Varying Parameter Vector Autoregression (search for similar items in EconPapers)
JEL-codes: C32 C4 G1 R3 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Dynamic Relations Between Housing Markets, Stock Markets, and Uncertainty in Global Cities: A Time-Frequency Approach (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:68:y:2023:i:c:s1062940823000736

DOI: 10.1016/j.najef.2023.101950

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