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Does the Speed of Change over the House Price Cycles Matter?

Akcay, Belgin and Yucel, Eray (2014): Does the Speed of Change over the House Price Cycles Matter?

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Abstract

Housing price boom-bust cycles lied at the heart of the latest global financial crisis. Many countries experienced booms from 2000 to 2006 which turned into bursts at about the same period, leading to a crisis of global scale. As housing booms are defined as periods in which housing price exceeds its fundamental value, the earlier literature devised several approaches to identify and analyze housing price cycles. Those studies have been successful in finding associations between housing price booms-busts and a number of macroeconomic indicators. However, the speed of change of house prices over the cycles remained untouched. So we aim at identifying housing price episodes with special emphasis placed on the pace of price changes and we document associations between housing cycles, macroeconomic factors and financial development for 26 countries. Our finding that these associations depend on the speed of change of prices over the housing price cycles rather than being uniform might be indicative of a missed spot in understanding housing price bubbles and policy design.

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