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Is there a stable relationship between real interest rates and housing prices? Evidence from several Euro area countries

The USV Annals of Economics and Public Administration

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Title Is there a stable relationship between real interest rates and housing prices? Evidence from several Euro area countries
 
Creator José Manuel Sánchez Santos; Department of Applied Economics, University of A Coruña
José Pablo Abeal Vázquez; Department of Applied Economics, University of A Coruña
 
Description This paper analyzes the relationship between real interest rates and housing prices in three European Union countries (France, Spain and the Netherlands) between 1999 and 2010. The main objective is to test whether there is a stable long-run relationship between both variables, as well as whether there are differences across countries. In order to do so, I use different real interest rates (short-term and long-term) and different housing price indices (nominal and real), and apply cointegration techniques and propose an error correction model, following the two-stage methodology suggested by Engle and Granger, in order to examine the different dynamics in the short and the long term. The main conclusion is that the relationship between real interest rates and housing prices is weak, although there are differences across countries. This has some implications for the single monetary policy conducted by the European Central Bank.
 
Publisher Editura Universitatii Ştefan cel Mare din Suceava
 
Contributor —
 
Date 2012-02-17
 
Type —
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Format application/pdf
 
Identifier http://www.seap.usv.ro/annals/ojs/index.php/annals/article/view/409
 
Source The USV Annals of Economics and Public Administration; Vol 11, No 2: December 2011; 46-55
The USV Annals of Economics and Public Administration; Vol 11, No 2: December 2011; 46-55
 
Language en