Partial pooling with cross-country priors: An application to house price shocks

Arbeitspapier

A structural Bayesian vector autoregression model predicts that - when accompanied by a decline in consumer confidence - a one-percent decrease in house prices is associated with a contraction of economic activity by 0.2 to 1.2 percent after one year. Results point to important second-round effects and additional exercises highlight the amplifying role of (i ) the mortgage rate and (ii ) consumers' expectations. A novel econometric approach exploits information available from the cross section. Shrinkage towards a cross-country average model helps to compensate for small country samples and reduces estimation uncertainty. As a by-product, the method delivers measures of cross-country heterogeneity.

Object Details

• ISBN: 978-3-95729-671-9
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Deutsche Bundesbank Discussion Paper ; No. 06/2020

Classification and Topics

• Classification: Wirtschaft ; Bayesian Analysis: General ; Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models ; Financial Markets and the Macroeconomy
• Subject: Bayesian model averaging ; dummy observations ; house price shocks

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Roth, Markus
• Event: Veröffentlichung
• (who): Deutsche Bundesbank
• (where): Frankfurt a. M.
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/214830
• Last update: 10.03.2025, 11:43 AM CET