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

 
Author/Editor: Tumbarello, Patrizia ; Wang, Shengzu
 
Publication Date: December 01, 2010
 
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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.
 
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
Publication Date: December 01, 2010
Format: Paper
Stock No: WPIEA2010291 Pages: 24
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
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