Economics at your fingertips  

Identifying and forecasting house prices: a macroeconomic perspective

Nan-Kuang Chen (), Han-Liang Cheng and Ching-Sheng Mao

Quantitative Finance, 2014, vol. 14, issue 12, 2105-2120

Abstract: This paper studies the forecasting performance of macroeconomic variables on housing returns and on the possible shifts of regimes in house price cycles. We motivate our empirical analysis based on a general equilibrium model, and use a Markov switching model to identify two regimes of housing returns: the high volatility ('boom-bust') regime and the low volatility ('tranquil') regime. Given US data - , we find that with a single-regime model inflation rate and federal funds rate perform better than other economic aggregates in predicting housing returns. Using the Markov switching model, inflation rate and the federal funds rate are the most consistent predictor for in-sample and out-of-sample forecast of the probability of the 'boom-bust' regime. The results imply that motives for inflation hedging and changes in monetary policy matter for the movements of future housing returns and the possible shifts of regimes in house price cycles.

Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link) (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from

Access Statistics for this article

Quantitative Finance is currently edited by Michael Dempster and Jim Gatheral

More articles in Quantitative Finance from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().

Page updated 2019-09-25
Handle: RePEc:taf:quantf:v:14:y:2014:i:12:p:2105-2120