Temporal causality between house prices and output in the US: A bootstrap rolling-window approach |
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| Institution: | 1. Department of Economics, University of Pretoria, Pretoria 0002, South Africa;2. Department of Economics, University of Nevada, Las Vegas, Las Vegas, NV 89154-6005, USA;3. Department of Economics, Eastern Mediterranean University, Famagusta, Northern Cyprus, via Mersin 10, Turkey;4. Advanced Mathematical Modelling, CSIR Modelling and Digital Science, PO Box 395, Pretoria 0001, South Africa;5. Department of Statistics, Nelson Mandela Metropolitan University, PO Box 77000, Port Elizabeth 6031, South Africa;1. Eastern Mediterranean University, Famagusta, via Mersin 10, Northern Cyprus, Turkey;2. Montpellier Business School, 2300 Avenue des Moulins, 34080 Montpellier, France;3. Department of Economics, University of Pretoria, Pretoria 0002, South Africa;4. USEK Business School, Holy Spirit University of Kaslik, PO BOX 446, Jounieh, Lebanon;1. Department of Economics, Nevsehir Haci Bektas Veli University, Nevsehir, Turkey;2. Department of Economics, Gaziantep University, Gaziantep, Turkey;1. NanoScience Technology Center, University of Central Florida, Orlando, FL 32826, USA;2. CREOL, The College of Optics and Photonics, University of Central Florida, Orlando, FL 32816, USA;3. Computer, Electrical, and Mathematical Sciences and Engineering, King Abdullah University of Science and Technology, (KAUST), Thuwal 23955-6900, Saudi Arabia;4. KAUST Solar Center, KAUST, Thuwal 23955-6900, Saudi Arabia;5. Department of Chemistry, University of Central Florida, Orlando, FL 32816, USA;6. Department of Materials Science and Engineering, University of Central Florida, Orlando, FL 32816, USA;7. Department of Electrical and Computer Engineering, University of Central Florida, Orlando, FL 32816, USA |
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| Abstract: | This paper examines the causal relationships between the real house price index and real GDP per capita in the US, using the bootstrap Granger (temporal) non-causality test and a fixed-size rolling-window estimation approach. We use quarterly time-series data on the real house price index and real GDP per capita, covering the period 1963:Q1 to 2012:Q2. The full-sample bootstrap non-Granger causality test result suggests the existence of a unidirectional causality running from the real house price index to real GDP per capita. A wide variety of tests of parameter constancy used to examine the stability of the estimated vector autoregressive models indicate short- and long-run instability. This suggests that we cannot rely on the full-sample causality tests and, hence, this warrants a time-varying (bootstrap) rolling-window approach to examine the causal relationship between these two variables. Using a rolling window size of 28 quarters, we find that while causality from the real house price to real GDP per capita occurs frequently, significant, but less frequent, evidence of real GDP per capita causing the real house price also occurs. These results imply that while the real house price leads real GDP per capita, in general (both during expansions and recessions), significant feedbacks also exist from real GDP per capita to the real house price. |
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| Keywords: | Real house price Real GDP per capita Bootstrap Time-varying causality |
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