House prices and unemployment: an empirical analysis of causality

Manuchehr Irandoust

Research output: Contribution to journalArticlepeer-review

23 Citations (Scopus)

Abstract

Purpose

This paper aims to examine whether there exists a long-run causal relationship between house prices and unemployment rates for eight major European countries.

Design/methodology/approach

The bootstrap panel Granger causality approach that accounts for cross-sectional dependence, slope heterogeneity and structural breaks is used to detect the direction of causality.

Findings

The empirical findings for the overall panel support the presence of unidirectional causality running from house prices to unemployment.

Practical implications

The findings are not only important for households but also for policymakers concerned with economic and financial stability.

Originality/value

There are only a limited number of studies that have investigated the direct link between house prices and employment or unemployment. Given the increased importance of labor market variables, particularly the choice of the unemployment rate as a key indicator in designing forward guidance and the increased financial stability concerns regarding house price dynamics, it is important to better understand the causal linkages between house prices and unemployment rates. To the best of the author’s knowledge, this paper is the first to apply the bootstrap panel Granger causality approach to examine the relationship between house prices and unemployment rates.

Original languageEnglish
Pages (from-to)148-164
Number of pages16
JournalInternational Journal of Housing Markets and Analysis
Volume12
Issue number1
DOIs
Publication statusPublished - 2019

Swedish Standard Keywords

  • Economics and Business (502)

Keywords

  • E24
  • Financial stability
  • Home ownership
  • House prices
  • Households
  • J64
  • Panel causality
  • R21
  • Unemployment rates

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