Time-Varying Impact of Uncertainty Shocks on the US Housing Market

Christina Christou (), Rangan Gupta and Wendy Nyakabawo ()
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Christina Christou: School of Economics and Management, Open University of Cyprus, 2252, Latsia, Cyprus
Wendy Nyakabawo: Department of Economics, University of Pretoria, Pretoria, South Africa

No 201870, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper investigates the impact of uncertainty shocks on the housing market of the United States using the time-varying parameter factor augmented vector autoregression (TVP-FAVAR). We use a comprehensive quarterly time-series dataset on real economic activity, price, and financial variables, besides the housing market variables, covering the period 1975:Q3 to 2014:Q3. Besides housing prices, we also consider variables related to home sales, permits, starts, as well as housing market sentiment. In general, the results of the cumulative response of housing variables to a 1 standard deviation positive uncertainty shock at the one-, four- and eight quarter horizon tends to change over time, both in terms of sign and magnitude, with the uncertainty shock primarily affecting home sales, permits and starts over short-, medium and long-runs, and housing sentiment in the medium-term. Interestingly, the impact on housing prices is statistically insignificant.

Keywords: housing market; stochastic volatility; time-varying parameter; FAVAR; uncertainty shocks (search for similar items in EconPapers)
JEL-codes: C15 C32 E32 R31 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2018-11
New Economics Papers: this item is included in nep-mac and nep-ure
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Journal Article: Time-varying impact of uncertainty shocks on the US housing market (2019)
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