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U.S. Disposable Personal Income and a Housing Price Index: A Fractional Integration Analysis

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  • Guglielmo Maria Caporale
  • Luis A. Gil-Alana

Abstract

In this paper, we examine the relationship between disposable personal income (DPI) in the United States and a house price index (HPI) during the last twenty years applying fractional integration and long-range dependence techniques to monthly data from January 1991 to July 2010. The empirical findings indicate that cointegration cannot hold, as mean reversion occurs in the case of DPI but not of HPI. Also, recursive analysis shows that the estimated fractional parameter is relatively stable over time for DPI while it increases throughout the sample for HPI. Interestingly, the estimates tend to converge toward the unit root after 2008 once the housing bubble had burst.

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  • Guglielmo Maria Caporale & Luis A. Gil-Alana, 2015. "U.S. Disposable Personal Income and a Housing Price Index: A Fractional Integration Analysis," Journal of Housing Research, Taylor & Francis Journals, vol. 24(1), pages 73-86, January.
    • Handle: RePEc:taf:rjrhxx:v:24:y:2015:i:1:p:73-86
    DOI: 10.1080/10835547.2015.12092098
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    Cited by:

    1. Jawadi, Fredj & Soparnot, Richard & Sousa, Ricardo M., 2017. "Assessing financial and housing wealth effects through the lens of a nonlinear framework," Research in International Business and Finance, Elsevier, vol. 39(PB), pages 840-850.

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    More about this item

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)

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