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Confidence vs. Uncertainty : An Explanation of Housing Prices In the Old EU Member States

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  • Blanka ŠKRABIĆ PERIĆ

    (University of Split, Faculty of Economics, Business and Tourism.)

  • Ana RIMAC SMILJANIĆ

    (University of Split, Faculty of Economics, Business and Tourism.)

  • Petar SORIĆ

    (University of Zagreb, Faculty Faculty of Economics and Business Zagreb.)

Abstract

This paper aims to shed some light on the soft data determinants of real housing prices in 14 developed European economies. Acknowledging heterogeneity and interdependence between the national real estate markets and their determinants, we apply a heterogeneous panel Granger causality test which allows for cross-sectional dependence. We discriminate between two groups of survey-based indicators: economic confidence and uncertainty. Results show that confidence exhibits a very strong short-run impact on house prices in the European economies. Uncertainty indicators, on the other hand, are mostly not significant. Our findings identify the construction sector confidence indicator as the relative “winner” of this empirical analysis, suggesting that the forecasting models of real housing prices should be augmented by the stated indicator.

Suggested Citation

  • Blanka ŠKRABIĆ PERIĆ & Ana RIMAC SMILJANIĆ & Petar SORIĆ, 2022. "Confidence vs. Uncertainty : An Explanation of Housing Prices In the Old EU Member States," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 31-45, October.
    • Handle: RePEc:rjr:romjef:v::y:2022:i:3:p:31-45
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    References listed on IDEAS

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    More about this item

    Keywords

    housing prices; real estate market; business and consumer surveys; economic uncertainty; economic policy uncertainty index;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E03 - Macroeconomics and Monetary Economics - - General - - - Behavioral Macroeconomics
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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