Speculative Bubbles in U.K. House Prices: Some New Evidence

In this article, we test the view, widely held among both academics and practitioners, that speculative bubbles have characterized the time series behavior of U.K. house prices in recent times. We motivate our empirical analysis using a stylized overlapping-generations model which generates a housin...

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Bibliographic Details
Published inSouthern economic journal Vol. 70; no. 4; pp. 777 - 795
Main Authors Garino, Gaia, Sarno, Lucio
Format Journal Article
LanguageEnglish
Published Stillwater Southern Economic Association 01.04.2004
Subjects
Age
Consumers
Consumption
Critical values
Dwellings
Econometrics
Economic bubbles
Explosives
House
Houses
Housing
Housing demand
Housing needs
Housing prices
Housing research
Hypotheses
Interest rates
Labor supply
Methodology
Middle age
Mortgage loans
Mortgage rates
Mortgages
Prices
Real estate market
Time series
United Kingdom
United Kingdom
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Summary:In this article, we test the view, widely held among both academics and practitioners, that speculative bubbles have characterized the time series behavior of U.K. house prices in recent times. We motivate our empirical analysis using a stylized overlapping-generations model which generates a housing demand function of the form assumed by a large literature, illustrating how rational bubbles may arise as a solution to the house price determination equation. Employing two recently developed econometric techniques specifically designed to test for rational bubbles, we then provide empirical evidence for the existence of bubbles in U.K. house prices over the sample period 1983-2002.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0038-4038
2325-8012
DOI:10.1002/j.2325-8012.2004.tb00604.x