Housing Policy Uncertainty in Korea and Its Effects on Housing Markets

Hyunduk Suh and So Jung Hwang
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So Jung Hwang: Inha University

No 2024-1, Inha University IBER Working Paper Series from Inha University, Institute of Business and Economic Research

Abstract: We estimate housing policy uncertainty (HPU) in Korea, employing the economic policy uncertainty (EPU) method by Baker et al. (2016). The uncertainty index is measured by the frequency of texts in Korean newspapers that imply housing policy uncertainty during 1997-2022. The HPU index has been high in Moo-hyun Roh's and Myung-bak Lee's administrations and has risen again since 2020. Also, HPU tends to increase during large housing market policy announcements, political instability, and administrative regime changes. We also analyze the effect of HPU on housing markets by estimating a vector autoregressive (VAR) model. The VAR results suggest that a rise in HPU negatively affects housing prices and residential constructions but increases housing price volatility. Meanwhile, a positive shock in the housing prices endogenously raises HPU, which suggests that uncertainty was typically more significant in policies that aim to stabilize the housing market overheating.

Keywords: housing policy; uncertainty; EPU; HPU; VAR (search for similar items in EconPapers)
JEL-codes: E6 R31 R38 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2024-02
New Economics Papers: this item is included in nep-ure
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