Exploring Macroeconomic Determinants of Housing Bubbles: New Evidence from Dynamic Panel Probit Models

Shu-hen Chiang and Chien-Fu Chen ()
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Shu-hen Chiang: Chung-Yuan Christian University
Chien-Fu Chen: National Dong Hwa University

Atlantic Economic Journal, 2025, vol. 53, issue 1, No 2, 3-17

Abstract: Abstract Since the 2008 global financial crisis, the detection of housing bubbles has attracted unprecedented attention. By using price-to-rent data collected from the Organization for Economic Co-operation and Development, this paper adopts the Phillips et al. right-tailed unit root tests to identify housing bubbles across the Group of Seven countries from the first quarter of 1970 to the second quarter of 2021. In addition, a novel estimation approach (the dynamic panel probit model) was employed to take account of the bubble persistence and explore the macroeconomic determinants driving the housing bubbles. The empirical results indicate that each country experienced episodes of housing bubbles and the bubble clusters appeared in two phases, namely, 2003–2008 and post-2016. More importantly, there is evidence that certain macroeconomic variables drove the housing bubbles, especially a low interest rate and rapidly-growing money supply. The policy implication of this study is that central banks implementing ultra-loose monetary policy need to take housing bubble risk into careful consideration.

Keywords: Housing bubbles; Right-tailed unit-root tests; Dynamic panel probit models; Monetary policy; R21; G12; E52 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11293-025-09820-8

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