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Testing for rational bubbles in Australian housing market from a long-term perspective

Vicente Esteve and Maria Prats ()
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Vicente Esteve: Universidad de Valencia and Universidad de Alcalá, Spain

No 2113, Working Papers from Department of Applied Economics II, Universidad de Valencia

Abstract: In this article, we use tests of explosive behavior in real house prices with annual data for the case of Australia for the period 1870?2020. The main contribution of this paper is the use of very long time series. It is important to use longer span data because it o¤ers more powerful econo- metric results. In order to detect episodes of potential explosive behavior in house prices over this long period, we use the recursive unit root tests for explosiveness proposed by Phillips, Wu, and Yu (2011), and Phillips, Shi, and Yu (2015a,b). According to the results, there is clear specula- tive bubble behavior in real house prices between 1997-2020, speculative process that has not yet been adjusted.

Keywords: House price; Explosiveness; Recursive unit root test; Multiple Structural Breaks (search for similar items in EconPapers)
JEL-codes: E31 E62 H62 R21 R39 (search for similar items in EconPapers)
Date: 2021-11
New Economics Papers: this item is included in nep-his, nep-mac and nep-ure
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