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Is There a Housing Bubble in Stockholm?: A Simple Error Correction Approach
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Economics.
2014 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

In this study an error correction model is estimated using monthly panel data from Stockholm covering the time period January 2005 to December 2012. In the long-run equation the fundamental variables real disposable income, real mortgage rate, real construction costs and population growth are shown to be significant. The exploration of the short-run dynamics reveals a significant error correction term suggesting a movement towards long-run equilibrium of 11.2 percent per month. The fitted values from the long-run equation are plotted against the actual real prices suggesting a slight inflation in prices in late 2012. Autocorrelation is present in the model, indicating a backward-looking pattern in real housing prices. These findings are consistent with speculative behavior but the price fluctuations are in large parts explained by the fundamental variables and as the cause of price discrepancies is unknown, an irrational price bubble cannot be concluded to exist.

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URN: urn:nbn:se:uu:diva-226367OAI: oai:DiVA.org:uu-226367DiVA: diva2:725245
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Bachelor Programme in Business and Economics
Available from: 2014-06-16 Created: 2014-06-16 Last updated: 2014-10-30Bibliographically approved

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