Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/334118 
Year of Publication: 
2024
Citation: 
[Journal:] Asian Journal of Economics and Banking (AJEB) [ISSN:] 2633-7991 [Volume:] 8 [Issue:] 2 [Year:] 2024 [Pages:] 146-161
Publisher: 
Emerald, Leeds
Abstract: 
Purpose - We propose an economic model of housing markets. The model incorporates the macroeconomic relationships between prices, demand and supply. Since vacancy rates are not observable, the demand-supply mismatches are identified using a microeconomic model of search, matching and price formation. The model is applied to data on regional housing markets in England and Wales. Design/methodology/approach - Economic theory combining macroeconomics and microeconomics together with new generation econometric methods for empirical analysis. Findings - The empirical model, estimated for the ten government office regions of England and Wales, validates the economic model. We find that there is substantial heterogeneity across the regions, which is useful in informing housing and land-use policies. In addition to heterogeneity, the model enables us to better understand unrestricted inter-regional spatial relationships. The estimated spatial autocorrelations imply different drivers of spatial diffusion in different regions. Research limitations/implications - In the nature of other empirical work, the findings are subject to specificities of the data considered here. The understanding of spatial diffusion can also be further developed in future work. Practical implications - This paper develops a nice way of closing macroeconomic models of housing markets when complete demand, supply and pricing data are not available. The model may also be useful when data are available but with large measurement errors. The model comes together with corresponding empirical methods. Social implications - Implications for the housing market and other regional policies are important. These are context-specific, but some implications for housing policy in the UK are provided in the paper as an example. Originality/value - Unique housing market paper combining both macroeconomic and microeconomic theory as well as both theory and empirics. The rich framework so developed can be extended to much future work.
Subjects: 
Housing demand
Housing markets
Housing supply
Search and matching
Spatial diffusion
JEL: 
C31
R21
R31
R33
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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