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Title:US disposable personal income and housing price index: A fractional integration analysis PDF Logo
Authors:Caporale, Guglielmo Maria
Gil-Alana, Luis A.
Issue Date:2010
Series/Report no.:CESifo working paper: Monetary Policy and International Finance 3208
Abstract:This paper examines the relationship between US disposable personal income (DPI) and house price index (HPI) during the last twenty years applying fractional integration and long-range dependence techniques to monthly data from January 1991 to July 2010. The empirical findings indicate that the stochastic properties of the two series are such that cointegration cannot hold between them, as mean reversion occurs in the case of DPI but not of HPI. Also, recursive analysis shows that the estimated fractional parameter is relatively stable over time for DPI whilst it increases throughout the sample for HPI. Interestingly, the estimates tend to converge toward the unit root case after 2008 once the bubble had burst. The implications for explaining the recent financial crisis and choosing appropriate policy actions are discussed.
Subjects:personal disposable income
house price index
fractional integration
JEL:C22
E30
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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