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Bubbles in House Prices and their Impact on Consumption: Evidence for the US

Research output: Working paper

Published
Publication date2009
Place of PublicationLancaster University
PublisherThe Department of Economics
Number of pages0
<mark>Original language</mark>English

Publication series

NameEconomics Working Paper Series

Abstract

This paper provides evidence that some aggregate and regional U.S. real house price indices exhibited a bubble in the last few years according to the Phillips et al. (2007) unit root test. We subsequently investigate whether house price acceleration (deceleration) had a signi.cant impact on consumption in an error correction mechanism implied by a wide class of optimizing models. Our results support the argument that real house prices have their major effect on consumption only during the bubble period.