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Monetary policy and bubbles in the national and regional UK housing markets

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  • I-Chun Tsai

Abstract

Numerous studies have explained the significant correlation between monetary policies and asset pricing bubbles. This study uses data on the overall UK housing market and the five UK regions with the highest house prices to evaluate the correlation between monetary policies and pricing bubbles in the UK housing markets. This study uses a theoretical model to verify whether monetary policies affect asset pricing bubbles. Fluctuations in house prices are classified into fluctuations related to fundamentals (the mean reversion behaviour and responses to information in the current period) and fluctuations unrelated to fundamentals (self-related behaviour). After estimating the fluctuation behaviour of house prices through quantile regression, this study asserts that a monetary easing environment can significantly increase housing returns. The self-related phenomenon of asset returns has increased significantly and has thus continuously increased prices and formed a bubble.

Suggested Citation

  • I-Chun Tsai, 2015. "Monetary policy and bubbles in the national and regional UK housing markets," Urban Studies, Urban Studies Journal Limited, vol. 52(8), pages 1471-1488, June.
    • Handle: RePEc:sae:urbstu:v:52:y:2015:i:8:p:1471-1488
    DOI: 10.1177/0042098014534904
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    Cited by:

    1. Antonakakis, Nikolaos & Chatziantoniou, Ioannis & Floros, Christos, 2015. "Dynamic Connectedness of UK Regional Property Prices," MPRA Paper 68421, University Library of Munich, Germany.
    2. Yingchao Lin & Zhili Ma & Ke Zhao & Weiyan Hu & Jing Wei, 2018. "The Impact of Population Migration on Urban Housing Prices: Evidence from China’s Major Cities," Sustainability, MDPI, vol. 10(9), pages 1-14, September.

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