House price convergence in the very long run: new evidence from Fourier quantile unit root test

Pan, Lei and Matsuki, Takashi (2021): House price convergence in the very long run: new evidence from Fourier quantile unit root test.

Abstract

We examine the house prices convergence across twelve OECD countries over the period 1905-2016. Using novel quantile unit root tests which allow for smooth breaks via a Fourier expansion series, we find that nine countries show the presence of relative house price convergence at all the quantiles. Focusing on several specific quantiles, eleven countries have significant convergence tendencies. Moreover, there are four definite patterns related to shocks on the relative house prices across quantiles.

• Item Type: MPRA Paper
• Language: English
• Keywords: House prices; Convergence; Unit root; Quantile regression; Fourier expansion
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O18 - Urban, Rural, Regional, and Transportation Analysis ; Housing ; Infrastructure; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R31 - Housing Supply and Markets

References

Awaworyi Churchill, S., Inekwe, J. and Ivanovski, K. (2018). House price convergence: Evidence from Australian cities. Economics Letters. 170, 88-90.

Bahmani-Oskooee, M., Chang, T., Elmi, Z. and Ranjbar, O. (2018). Re-testing prebischsinger hypothesis: New evidence using Fourier quantile unit root test. Applied Economics. 50(4), 441-454.

Becker, R., Enders, W. and Lee, J. (2004). A general test for time dependence in parameters. Journal of Applied Econometrics. 19(7), 899-906.

Deaton, A. (1992). Understanding Consumption. New York, NY: Oxford University Press.

Dickey, D.A. and Fuller,W.A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association. 74(366), 427-431.

Elliott, G., Rothenberg, T.J. and Stock, J.H. (1996). Efficient tests for an autoregressive unit root. Econometrica. 64(4), 813-836.

Holmes, M.J., Otero, J. and Panagiotidis, T. (2019). Property heterogeneity and convergence club formation among local house prices. Journal of Housing Economics. 43, 1-13.

Holmes, M. and Grimes, A. (2008). Is there long-run convergence among regional house prices in the UK? Urban Studies. 45(8), 1531-1544.

Jarque, C.M. and Bera, A.K. (1980). Efficient tests for normality, homoscedasticity and serial independence of regression residuals. Economic Letters. 6(3), 255-259.

Jorda`, O` ., Schularick, M. and Taylor, A.M. (2017). Macrofinancial history and the new business cycle facts. NBER Macroeconomics Annual. 31(1), 213-263.

Kim, Y.S. and Rous, J.J. (2012). House price convergence: Evidence from US state and metropolitan area panels. Journal of Housing Economics. 21, 169-186.

Koenker, R. and Xiao, Z. (2004). Unit root quantile autoregression inference. Journal of the American Statistical Association. 99(467), 775-787.

Kwiatkowski, D., Phillips, P.C.B., Schmidt, P.J. and Shin, Y. (1992). Testing the null hypothesis of stationarity against the alternative of a unit root: How sure are we that economic time series have a unit root. Journal of Econometrics. 54(1-3), 159-178.

Modiglinai, F. and Brumberg, R.H. (1954). Utility analysis and the consumption function: An interpretation of cross-section data, in Kenneth K. Kurihara, ed., Post-Keynesian Economics, New Brunswick, NJ. Rutgers University Press, 388-436.

Montagnoli, A. and Nagayasu, J. (2015). UK house price convergence clubs and spillovers. Journal of Housing Economics. 30, 50-58.

Newey, W.K. and West, K.D. (1987). A simple positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix. Econometrica. 55(3), 703-708.

Phillips, P.C. and Sul, D. (2007). Transition modelling and econometric convergence tests. Econometrica. 75, 1771-1855.

Tsai, I-C. (2018). House price convergence in euro zone and non-euro zone countries. Economic Systems. 42(2), 269-281.