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Spillover Effects of Apartment Housing Prices across Cities: A Generalized Forecast Error Variance Decomposition for Seven Large Cities

Hangyong Lee 1 Jin Lee 2

1한양대학교
2이화여자대학교

Accredited

ABSTRACT

This study examines spillover effects of apartment housing prices across seven large cities in Korea. Unlike the previous studies, we measure total spillover index, directional spillovers, and net spillovers in a systematic and comprehensive way under the generalized forecast error variance decomposition framework which is invariant to the variable ordering. The empirical results show that over 50% of total variability of apartment housing prices are explained by the spillover effects, suggesting that the apartment housing market is fairly interconnected across regions. The subsample results and the rolling regression analysis show that the direction of spillover has changed. In the 1986-1999 sample period, the spillovers from non-capital regions appear to be stronger, while the spillovers within the capital area and the spillovers from capital area to non-capital area have increased since 2000.

Citation status

* References for papers published after 2022 are currently being built.