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Pitfalls in the cointegration analysis of housing prices with the macroeconomy: Evidence from OECD countries

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  • Gueye, Ghislain Nono

Abstract

We use data from 20 OECD countries to show strong evidence for the existence of cross-section dependence in international housing prices. This structural relationship is important to consider when studying housing prices panels. First, we implement first-generation tests (tests which assume cross-section independence) and find no evidence for stationarity or cointegration. However, we find strong evidence for stationarity and cointegration when we employ second-generation tests (tests which assume cross-section dependence). The spurious results of the former tests may lead researchers on housing prices dynamics to inaccurate conclusions with the potential to ill-inform policy-makers.

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  • Gueye, Ghislain Nono, 2021. "Pitfalls in the cointegration analysis of housing prices with the macroeconomy: Evidence from OECD countries," Journal of Housing Economics, Elsevier, vol. 51(C).
    • Handle: RePEc:eee:jhouse:v:51:y:2021:i:c:s1051137721000012
    DOI: 10.1016/j.jhe.2021.101748
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    More about this item

    Keywords

    Housing prices; Macroeconomy; Cointegration; Vector error-correction;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • F15 - International Economics - - Trade - - - Economic Integration

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