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Real effects of regional house prices: dynamic panel estimation with heterogeneity

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  • Muñoz, Sònia

Abstract

This paper uses recently developed methods for estimating dynamic heterogeneous cointegrated panel data models - which allows for heterogeneity in parameters and dynamics across agents - to study housing wealth effects in a dynamic model of the 50 US states and the District of Columbia from the 1970s to the 1990s. The results show that housing prices have a unit root and are cointegrated with consumption. Even though an aging population has some effect on consumption in some states, it cannot account for the heterogeneity in housing wealth elasticities. Finally, we find that when state heterogeneity is taken into account, housing capital gains translate into increased spending with an elasticity ranging from 0.15 to 0.23.

Suggested Citation

  • Muñoz, Sònia, 2004. "Real effects of regional house prices: dynamic panel estimation with heterogeneity," LSE Research Online Documents on Economics 24704, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:24704
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    File URL: http://eprints.lse.ac.uk/24704/
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    More about this item

    Keywords

    Housing price behaviour; Wealth effects; Dynamic panel estimation;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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