An early warning system to predict the house price bubbles

Arbeitspapier

In this paper, we construct the country-specific chronologies of the house price bubbles for 12 OECD countries over the period 1969:Q1- 2010:Q2. These chronologies are obtained using a combination of a fundamental and a filter approaches. The resulting speculative bubble chronology is the one that provides the highest concordance between these two techniques. In addition, we suggest an early warning system based on three alternative approaches: signalling approach, logit and probit models. It is shown that the latter two models allow much more accurate predictions of the house price bubbles than the signalling approach. The prediction accuracy of the logit and probit models is high enough to make them useful in forecasting the future speculative bubbles in housing market. Thus, our method can be used by the policymakers in their attempts to timely detect the house price bubbles and attenuate their devastating effects on the domestic and world economy.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DIW Discussion Papers ; No. 1142

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 ; Immobilienpreis ; Bubbles ; Prognoseverfahren ; Frühwarnsystem ; OECD-Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dreger, Christian ; Kholodilin, Konstantin A.
• Event: Veröffentlichung
• (who): Deutsches Institut für Wirtschaftsforschung (DIW)
• (where): Berlin
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/57250
• Last update: 10.03.2025, 11:44 AM CET