Unveiling the House Price Movements and Financial Development

Belgin Akcay and Mustafa Yücel

MPRA Paper from University Library of Munich, Germany

Abstract: Today, it is widely recognized that housing price boom-bust cycles lay at the heart of the latest global financial crisis. A housing boom is commonly defined as a period in which a housing price exceeds its fundamental value. Like most of the European Union member countries, many economies experienced the housing boom during the period of 2000–2006. Moreover, housing booms turned into busts in many countries at about the same period, causing a deep crisis. Our aim in this paper is to look for the determinants of housing price cycles and to investigate the relationship between housing boom-bust cycles and indicators of housing development. For this, we first detect the turning points of housing prices and identify housing price boom-bust cycles for 27 European countries and the US from 1995 to 2013 using quarterly data and a judgmentally augmented version of the dating procedure due to Ball (1994). Having obtained a categorization of boom versus boom-bust countries, in the second step, we reveal the relationships between housing cycles, macroeconomic factors and financial development by means of panel probit analysis.

Keywords: European Union; House prices; Boom-bust cycles; Financial development (search for similar items in EconPapers)
JEL-codes: C51 C58 E44 G01 (search for similar items in EconPapers)
Date: 2014-08-04, Revised 2014-10-19
New Economics Papers: this item is included in nep-mac and nep-ure
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https://mpra.ub.uni-muenchen.de/68927/8/MPRA_paper_68927.pdf revised version (application/pdf)

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