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On the asymmetries created by the Great Recession in the US real estate market

Achille Dargaud Fofack (Business and Economics, Rauf Denktas University, North Cyprus, Cyprus)
Serge Djoudji Temkeng (Faculty of Social and Management Sciences, University of Buea, Buea, Cameroon)
Clement Oppong (Business School, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana)

Journal of Economic and Administrative Sciences

ISSN: 1026-4116

Article publication date: 30 April 2021

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Abstract

Purpose

This paper aims at analyzing the asymmetries created by the Great Recession in the US real estate sector.

Design/methodology/approach

This paper uses a Markov-switching dynamic regression model in which parameters change when the housing market moves from one regime to the other.

Findings

The results show that the effect of real estate loans, interest rate, quantitative easing and working age population are asymmetric across bull and bear regimes. It is also found that the estimated parameters are larger in bull regime than bear regime, indicating a tendency to create house price bubbles in bull market.

Practical implications

Since three of those asymmetric variables (real estate loans, interest rate and quantitative easing) are related to monetary policy, the Fed can mitigate their impact on an interest-sensitive sector such as housing by engaging in a countercyclical monetary policy.

Originality/value

The estimated intercept and the variance parameter both vary from one regime to the other, thus justifying the use of a regime-dependent model.

Keywords

Citation

Fofack, A.D., Temkeng, S.D. and Oppong, C. (2021), "On the asymmetries created by the Great Recession in the US real estate market", Journal of Economic and Administrative Sciences, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JEAS-12-2020-0218

Publisher

:

Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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