An alternative method for identifying booms and busts in the Euro area housing market

Dieter Gerdesmeier, Andreja Lenarčič () and Barbara Roffia

Applied Economics, 2015, vol. 47, issue 5, 499-518

Abstract: This article develops a model-based method to detect booms and busts in the Euro area housing market. A model is constructed and tested, whereby the user cost rate, a demographic variable, unemployment rate, disposable income, debt-to-income ratio and housing stock are fundamental variables significantly explaining house price (HP) developments. Booms/busts are identified as episodes when the HP index exceeds the levels implied by those economic fundamentals. Furthermore, a cross-check with boom/bust episodes based on other methods is carried out to substantiate the results, while the ability of the model in predicting booms/busts in real time is also tested.

Date: 2015
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Working Paper: An alternative method for identifying booms and busts in the euro area housing market (2012)
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DOI: 10.1080/00036846.2014.975328

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