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Northern Ireland's property market bubble: a preliminary analysis

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  • E. Gallagher
  • D. Bond
  • E. Ramsey

Abstract

This article applies a recursive regression technique developed by Phillips and Yu (2011) to examine recent property market movements in both the Republic of Ireland and Northern Ireland in the context of an asset market bubble. This technique, which interprets explosiveness in the price series as evidence of the existence of a bubble, provides a method for identifying not only bubble behaviour but also a dating mechanism. Statistically significant bubble characteristics are identified in both series. For the Republic of Ireland, a prolonged period of explosiveness is detected ranging from 1996Q2 to 2007Q2. Interestingly, the explosiveness is stronger in the late 1990s and early 2000s. For Northern Ireland, the analysis identifies a short yet intense bubble when the market in the Republic had matured, extending from 2005Q3 to 2009Q1 and reaching a peak in 2007Q2. These results taken together indicate the possibility of a spillover effect between the two regions; however, further research to investigate this possibility is necessary.

Suggested Citation

  • E. Gallagher & D. Bond & E. Ramsey, 2015. "Northern Ireland's property market bubble: a preliminary analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 22(1), pages 61-65, January.
    • Handle: RePEc:taf:apeclt:v:22:y:2015:i:1:p:61-65
    DOI: 10.1080/13504851.2014.925044
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    References listed on IDEAS

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    1. Flavin, Marjorie A, 1983. "Excess Volatility in the Financial Markets: A Reassessment of the Empirical Evidence," Journal of Political Economy, University of Chicago Press, vol. 91(6), pages 929-956, December.
    2. Peter C. B. Phillips & Jun Yu, 2011. "Dating the timeline of financial bubbles during the subprime crisis," Quantitative Economics, Econometric Society, vol. 2(3), pages 455-491, November.
    3. Michael McCord & Stanley McGreal & Jim Berry & Martin Haran & Peadar Davis, 2011. "The implications of mortgage finance on housing market affordability," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 4(4), pages 394-417, October.
    4. Phillips, Peter C.B. & Magdalinos, Tassos, 2007. "Limit theory for moderate deviations from a unit root," Journal of Econometrics, Elsevier, vol. 136(1), pages 115-130, January.
    5. Kenneth D. West, 1987. "A Specification Test for Speculative Bubbles," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(3), pages 553-580.
    6. LeRoy, Stephen F & Porter, Richard D, 1981. "The Present-Value Relation: Tests Based on Implied Variance Bounds," Econometrica, Econometric Society, vol. 49(3), pages 555-574, May.
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    Cited by:

    1. Kennedy, Gerard & O'Brien, Eoin & Woods, Maria, 2016. "Assessing the sustainability of Irish residential property prices: 1980Q1-2016Q2," Economic Letters 11/EL/16, Central Bank of Ireland.
    2. ZEREN, Feyyaz & ERGÜZEL, Oylum Şehvez, 2015. "Testing For Bubbles In The Housing Market: Further Evidence From Turkey," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 19(1), pages 40-52.

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