An early warning system to predict the speculative house price bubbles

Arbeitspapier

In this paper, the authors construct country-specific chronologies of house price bubbles for 12 OECD countries over the period 1969:Q1-2009:Q4. These chronologies are obtained using a combination of fundamental and filter approaches. The resulting speculative bubble chronology is the one providing the highest concordance between these two techniques. In addition, the authors suggest an early warning system based on three alternative approaches: signaling approach, logit, and probit models. It is shown that the latter two models allow much more accurate predictions of house price bubbles than the signaling approach. The prediction accuracy of the logit and probit models is high enough to make them useful in forecasting the future speculative bubbles in the housing market. Thus, this method can be used by policymakers in their attempts to timely detect house price bubbles and to attenuate their devastating effects on the domestic and world economy.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Economics Discussion Papers ; No. 2012-44

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities ; Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models ; Business Fluctuations; Cycles ; Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications
• Subject: house prices ; early warning system ; OECD countries

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dreger, Christian ; Kholodilin, Konstantin A.
• Event: Veröffentlichung
• (who): Kiel Institute for the World Economy (IfW)
• (where): Kiel
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/62349
• Last update: 10.03.2025, 11:44 AM CET