Macroeconomics Determinants of Housing Prices:Evidence from Taiwan
Date Issued
2011
Date
2011
Author(s)
Chang, Chih-Wen
Abstract
Since the U.S. subprime mortgage crisis, the innovation of financial products has significant impact on the financial and capital markets, and even the real estate market itself. When the governmental authorities plan and conduct the public policy, or people invest the real estate or the financial institutions conduct risk management, all of them need to understand the price trends of real estate and the factors that affect real estate prices. This research investigates whether a significant rise in property prices in Taipei City & New Taipei City is determined by the macroeconomic variables such as business cycles, the interest rates, stock price, exchange rate, unemployment rate, wages, housing loans and consumer price index etc.
Our sample period starts from Q1 of 1998 to Q2 of 2010 with quarterly data. Using structural changes, ARMA models, vector autoregressions model (VAR), Granger Causality Test and Cointegration model we verify the relationship between macroeconomic variables and the real estate prices. In addition, we test whether the real estate price change of the Taipei City and New Taipei City is a long-term steady change and whether it shows a lagging or leading effect.
Our major findings are as follows: (1) The real estate index of Taipei City is not influenced by the decrease of Gift Tax, while The New Taipei City is. (2) The interest rate Granger cause Real Estate Index of Taipei City and the New Taipei City. (3) The empirical results show that the macroeconomic variables cannot explain housing prices change in Taipei City better than housing price itself, while the New Taipei City can. (4) The Real Estate Index of Taipei City and the New Taipei City exist a long-term equilibrium relationship.
Subjects
real estate
structural changes
ARMA models
vector autoregressions model
Granger Causality Test and Cointegration model
Type
thesis
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