To read the full version of this content please select one of the options below:

House prices and unemployment: an empirical analysis of causality

Manuchehr Irandoust (Department of Economics and Finance, Kristianstad University, Kristianstad, Sweden)

International Journal of Housing Markets and Analysis

ISSN: 1753-8270

Article publication date: 13 February 2019

Issue publication date: 14 February 2019

737

Abstract

Purpose

This paper aims to examine whether there exists a long-run causal relationship between house prices and unemployment rates for eight major European countries.

Design/methodology/approach

The bootstrap panel Granger causality approach that accounts for cross-sectional dependence, slope heterogeneity and structural breaks is used to detect the direction of causality.

Findings

The empirical findings for the overall panel support the presence of unidirectional causality running from house prices to unemployment.

Practical implications

The findings are not only important for households but also for policymakers concerned with economic and financial stability.

Originality/value

There are only a limited number of studies that have investigated the direct link between house prices and employment or unemployment. Given the increased importance of labor market variables, particularly the choice of the unemployment rate as a key indicator in designing forward guidance and the increased financial stability concerns regarding house price dynamics, it is important to better understand the causal linkages between house prices and unemployment rates. To the best of the author’s knowledge, this paper is the first to apply the bootstrap panel Granger causality approach to examine the relationship between house prices and unemployment rates.

Keywords

Acknowledgements

The useful comments of two anonymous referees are really appreciated. Of course, any remaining error is the auhtor’s.

Citation

Irandoust, M. (2019), "House prices and unemployment: an empirical analysis of causality", International Journal of Housing Markets and Analysis, Vol. 12 No. 1, pp. 148-164. https://doi.org/10.1108/IJHMA-03-2018-0021

Publisher

:

Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited

Related articles