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International Transmission Mechanisms and Contagion in Housing Markets
Author(s) -
Nanda Anupam,
Yeh JiaHuey
Publication year - 2016
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12288
Subject(s) - openness to experience , economics , house price , investment (military) , autoregressive model , vector autoregression , international economics , transmission (telecommunications) , macroeconomics , monetary economics , econometrics , psychology , social psychology , politics , political science , law , electrical engineering , engineering
Abstract This paper explores international transmission mechanism and its role in contagion effect in the housing markets across six major Asian cities. The analysis is based on the identification of house price diffusion effects through a global vector autoregressive ( GVAR ) model estimated using quarterly data for six major Asian cities (Hong Kong, Tokyo, Seoul, Singapore, Taipei and Bangkok) from 1991Q1 to 2011Q2. The empirical results indicate that the open economies heavily relying on international trade such as Singapore, Japan (Tokyo), Taiwan (Taipei) and Thailand (Bangkok) show positive correlations between the economy's openness and house prices, which is consistent with the Balassa–Samuelson hypothesis. Interestingly, some region‐specific conditions also appear to play important roles as determinants of house price movements, which may be driven by restrictive housing policies and demand–supply imbalances such as Singapore and Bangkok. These results are reasonably robust across several model specifications. The findings bear significant implications for formulation of investment strategy and public policies.