Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153894
Authors: 
Gattini, Luca
Ganoulis, Ioannis
Year of Publication: 
2012
Series/Report no.: 
ECB Working Paper 1461
Abstract: 
In comparison with the large literature on house prices, housing investments have been studied far less. This paper investigates the behaviour of private residential investments for the six largest European economies, namely: Germany, France, Italy, Spain, the Netherlands and the United Kingdom. It employs a common modelling structure based on an error correction approach and country specific models. First, co-integration among the parsimoniously specified set of fundamental variables is detected in all countries. Second, cross-country differences are found in the responsiveness of private residential investments to real prices and to other relevant factors. Germany has the strongest response of private residential investments to house price changes whereas Italy shows the lowest responses. In Spain investments seem to be primarily related to their lagged component and short-term changes in house prices, and show a poor relationship with deviations from long-term fundamentals. In some countries, the lagged component of residential investments seems to point to a high persistency effect.
Subjects: 
co-integration
elasticity
error-correction mechanism
Housing investments
JEL: 
C2
R30
E22
Document Type: 
Working Paper

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