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The Dynamic Relationship between House Prices and Output: Evidence from US Metropolitan Statistical Areas

Nicholas Apergis (), Beatrice Desiree Simo-Kengne, Rangan Gupta () and Tsangyao Chang ()

No 201349, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper investigates the long-run and short-term dynamics of 351 US metropolitan statistical area housing prices in relation to personal income. We apply a panel cointegration approach on annual data from 1993 to 2011 and find a long-run relationship between local house prices and per capita personal income. The causal direction is then assessed based on an autoregressive distributed lag specification that also accommodates for error-correction. Results from Granger-causality tests reveal the existence of a bi-directional causality between real house prices and real per capita personal income over both long- and short-horizons. We conclude that changes in personal income can predict house price movements and vice versa.

Keywords: Real house prices; Real personal income per capita; Panel cointegration; Panel causality (search for similar items in EconPapers)
JEL-codes: C33 D31 R31 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2013-06
New Economics Papers: this item is included in nep-pbe and nep-ure
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