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The role of economic policy uncertainty in forecasting housing prices volatility in developed economies: evidence from a GARCH-MIDAS approach

Ting Fan (School of Economics and Management, Southwest Jiaotong University, Chengdu, China)
Asadullah Khaskheli (School of Management, Hainan University, Haikou, China)
Syed Ali Raza (Department of Business Administration, IQRA University, Karachi, Pakistan)
Nida Shah (Department of Business Administration, IQRA University, Karachi, Pakistan)

International Journal of Housing Markets and Analysis

ISSN: 1753-8270

Article publication date: 19 May 2022

Issue publication date: 14 August 2023

307

Abstract

Purpose

In the past few years, numerous economic uncertainty challenges have occurred globally. These uncertainties grasp the attention of the researchers and they examine the role of economic policy uncertainties in several aspects. Therefore, this study contributes to the literature by exploring the house prices volatility and economic policy uncertainty nexus in G7 countries.

Design/methodology/approach

The authors applied the newly introduced econometric technique, the GARCH-MIDAS model, to the sample size of January 1998–May 2021.

Findings

The result shows a significant relationship between house prices volatility and economic policy uncertainty. Moreover, economic policy uncertainty acts as a significant determinant of house prices volatility. In addition, the out-of-sample also shows that the economic policy uncertainty is an effective predictor and the GARCH-MIDAS has a better predictive ability.

Originality/value

This paper makes a unique contribution to the literature with reference to developed economies, being a pioneering attempt to investigate the GARCH-MIDAS model to analyze the relationship between housing prices volatility and economic policy uncertainty by applying more rigorous and advanced econometric techniques.

Keywords

Acknowledgements

This research was funded by NSFC (72172129), the National Social Science Fund of China (20BSH103), Ministry of Education, Humanities and Social Science projects (21YJA63003, 19YJC860033), and Sichuan Liquor Development Center (CJZ21-03).

Citation

Fan, T., Khaskheli, A., Raza, S.A. and Shah, N. (2023), "The role of economic policy uncertainty in forecasting housing prices volatility in developed economies: evidence from a GARCH-MIDAS approach", International Journal of Housing Markets and Analysis, Vol. 16 No. 4, pp. 776-791. https://doi.org/10.1108/IJHMA-03-2022-0040

Publisher

:

Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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