The Nonlinear House Price Adjustment Process in Developed and Transition Countries

Petra Posedel Šimović () and Maruška Vizek

No 1001, Working Papers from The Institute of Economics, Zagreb

Abstract: We use a nonlinear framework in order to explore house price determinants and their adjustment properties. We test for threshold cointegration using a sample of four developed countries (the United States, the United Kingdom, Spain, and Ireland) and four transition countries (Bulgaria, Croatia, the Czech Republic, and Estonia). All eight countries experienced an intensive increase in house prices during the 1990s and the first half of this decade. In addition to testing for nonlinearities, we focus on house price determinants in these four transition countries of Central and Eastern Europe. An asymmetric house price adjustment is present in all transition countries and the U.S., while no threshold effects are detected in developed European countries. In a threshold error correction framework, house prices are aligned with the fundamentals; but house price persistence coupled with a slow and asymmetric house price adjustment process might have facilitated the house price boom in transition countries and the U.S.

Keywords: house prices; threshold cointegration; asymmetric adjustment; transition (search for similar items in EconPapers)
JEL-codes: C22 R21 R31 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2010-03
New Economics Papers: this item is included in nep-tra and nep-ure
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Published in CPB document No 154

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Related works:
Journal Article: Are House Prices Characterized by Threshold Effects? Evidence from Developed and Post-Transition Countries (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:iez:wpaper:1001

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