Housing price volatility: uncertainty, an asymmetric econometric analysis – some European country experiences

Abstract

Purpose

The purpose of this paper is to examine the asymmetric impact of economic policy uncertainty (EPU) on the volatility of the housing price index (RP) based on quarterly observations from major European countries, namely, France, Germany, Sweden, Greece Italy and the UK.

Design/methodology/approach

The nonlinear autoregressive distributed lag model method is used to investigate the asymmetric impact of EPU on RP. In addition to considering EPU as the explanatory variable, industrial production (IP) (as a proxy for economic growth), interest rate (I), inflationary tendency (Consumer Price Index) and share prices (S) are included as major control variables. The period of the observations runs from 1996Q1 to 2019Q1.

Findings

The Wald test confirms the long-run asymmetric relationship for all countries. The alternative specification of the data sets reconfirms the asymmetric impact on RP in the long run, thereby verifying the robustness of the study.

Research limitations/implications

The study has implications for investors seeking to incorporate housing price behaviour within their portfolio structure. The analysis and findings are constrained by the availability of data.

Originality/value

This is one of the few studies on housing price dynamics related to the major economies of the European region that explore asymmetries. Additionally, it is the first to explore the asymmetry dynamics using the EPU variable.

Citation

Ghosh, S. (2021), "Housing price volatility: uncertainty, an asymmetric econometric analysis – some European country experiences", International Journal of Housing Markets and Analysis, Vol. 14 No. 5, pp. 1004-1026. https://doi.org/10.1108/IJHMA-08-2020-0091