Real Estate Bubbles and Contagion: Evidence from Selected European Countries
Using quarterly housing price-to-rent ratios from 1970 to 2018, this paper investigated the presence of real estate bubbles at a national level in eight selected European countries, namely Belgium, France, Germany, Italy, the Netherlands, Portugal, Spain, and the United Kingdom. Then, we analyzed bubbles contagion among these countries. We applied the generalized sup ADF test developed by Phillips et al. (2015) to detect explosive behavior in house prices. Subsequently, we implemented the non-parametric model with time varying coefficients developed by Greenaway-McGrevy and Phillips (2016) to estimate bubbles contagion among European real estate markets. We found evidence of at least one historical bubble in all these countries, with Germany, the Netherlands, Portugal, and Spain currently experiencing a rising bubble. The results also suggest that bubbles are contagious between these real estate markets.
Copyright (c) 2021 Jean-Louis Bago, Imad Rherrad, Koffi Akakpo, Ernest Ouédraogo
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
The Review of Economic Analysis is committed to the open exchange of ideas and information.
Unlike traditional print journals which require the author to relinquish copyright to the publisher, The Review of Economic Analysis requires that authors release their work under Creative Commons Attribution Non-Commercial license. This license allows anyone to copy, distribute and transmit the work provided the use is non-commercial and appropriate attribution is given.
A 'human-readable' summary of the licence is here and the full legal text is here.