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A wavelet analysis of the ripple effect in UK regional housing markets

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  • Lo Cascio, Iolanda

Abstract

The paper aims at gaining insights on the spatio-temporal mechanism of house price spillovers, also known as ripple effect, among 12 UK regional housing markets, over the period 1973–2018. From a policy perspective, it is essential to discriminate if the effects of a shock decay more slowly along the geographical dimension as compared to the decay along the time dimension. We enter the debate in a novel manner by using some wavelet analysis tools (wavelet coherence and phase differences amongst others) which reveal the spectral characteristics of a series and show how different periodic components of housing returns evolve over time. Results are interesting. Spillovers from London to other markets are detected both at business cycle frequencies and in the long run for those regions closer to London. More distant regions price changes lead London market only in the short run and for selected time spans; at business cycle frequencies, London is follower during the crisis. However, in the long run, London remains the dominant market.

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  • Lo Cascio, Iolanda, 2021. "A wavelet analysis of the ripple effect in UK regional housing markets," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 1093-1105.
    • Handle: RePEc:eee:reveco:v:76:y:2021:i:c:p:1093-1105
    DOI: 10.1016/j.iref.2021.08.001
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    Cited by:

    1. Vijay Kumar Vishwakarma, 2021. "Long-run drivers and integration in interprovincial Canadian housing price relations," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 16(1), pages 22-40, November.

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    More about this item

    Keywords

    Wavelet coherence; Ripple effect; House prices; Returns;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • E39 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Other

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