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What Drives House Prices in Australia? A Cross-Country Approach

Author/Editor: Tumbarello, Patrizia | Wang, Shengzu
Authorized for Distribution: December 1, 2010
Electronic Access: Free Full Text (PDF file size is 1,292KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: This paper analyzes the factors driving house prices in Australia from a cross-country perspective using several approaches. It uses a cointegration technique to estimate the long-run equilibrium house prices in Australia, New Zealand, and Canada and assesses the extent of a possible disequilibrium. It also presents an event analysis to shed some light on the link between house prices, capital inflows and the terms of trade. The econometric analysis suggests an overvaluation of 5-10 percent depending on the model specification. Event analysis indicates that terms of trade shocks were associated with larger increases in house prices in Australia, than in the case of strong capital inflow episodes.
 
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Series: Working Paper No. 10/291
Subject(s): Australia | Capital inflows | Cross country analysis | Economic models | Housing prices | Terms of trade
Author's keyword(s): House prices | cointegration | VECM | event analysis | capital inflows | terms of trade
 
English  
    Published:   December 1, 2010        
            Format:   Paper
    Stock No:   WPIEA2010291   Pages:   24
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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