An early warning system to predict the speculative house price bubbles

Christian Dreger and Konstantin Kholodilin ()

No 2012-44, Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: In this paper, the authors construct country-specific chronologies of house price bubbles for 12 OECD countries over the period 1969:Q1-2009:Q4. These chronologies are obtained using a combination of fundamental and filter approaches. The resulting speculative bubble chronology is the one providing the highest concordance between these two techniques. In addition, the authors suggest an early warning system based on three alternative approaches: signaling approach, logit, and probit models. It is shown that the latter two models allow much more accurate predictions of house price bubbles than the signaling approach. The prediction accuracy of the logit and probit models is high enough to make them useful in forecasting the future speculative bubbles in the housing market. Thus, this method can be used by policymakers in their attempts to timely detect house price bubbles and to attenuate their devastating effects on the domestic and world economy.

Keywords: house prices; early warning system; OECD countries (search for similar items in EconPapers)
JEL-codes: C25 C33 E32 E37 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-for and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: An early warning system to predict speculative house price bubbles (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:201244

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