Linear and nonlinear causality in the UK housing market: a regional approach

Eleni Kyriazakou, Theodore Panagiotidis

Abstract


We examine the causal relationship between 12 UK regional house prices. Our data span from 1983:Q1 to 2012:Q4. The causal linkages both for the first differences and the levels are examined via Granger causality. The former allows us to examine short-run predictability while the latter the long-run. We relax the assumption of linearity and examine nonlinear causality both for the levels and the first differences. We find that long-run causality among the regions is mainly linear while in the short-run is nonlinear. London’s effect on the other regions is found to be mainly nonlinear in the short-run.

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References


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DOI: https://doi.org/10.17811/ebl.3.4.2014.288-297

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ISSN: 2254-4380