engleski

The Influence of Stock Market and Housing Wealth on Consumption Expenditures in Transition Countries

This paper uses cointegration and error-correction models to examine the long-run and short-run behavior of house prices in Eastern and Western European countries. Four post-transition (Bulgaria, Croatia, the Czech Republic, and Estonia) and three developed EU countries (Ireland, Spain, and the U.K.) are included in the sample. House price behavior for each country is modeled separately as a function of income, interest rates, credit, construction activity, and employment. The results of the empirical analysis suggest that, in the long run, interest rate changes explain house price behavior in both groups of countries, while income changes are only relevant for Western European countries. Along with interest rates and income, house prices in both groups of countries react in the short run to changes in the construction activity. Moreover, house price persistence is important for short-run house price changes in both groups of countries. Housing loan changes also affect the short-run house price behavior, but this effect is limited to Eastern European countries.

determinants of house prices; housing markets; cointegration; Central and Eastern Europe; Western Europe

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