Article ID Journal Published Year Pages File Type
5103545 The Quarterly Review of Economics and Finance 2017 37 Pages PDF
Abstract
This paper investigates whether the news-based measure of economic policy uncertainty (EPU) could help in forecasting the real housing returns in ten (Canada, France, Germany, Italy, Japan, The Netherlands, South Korea, Spain, United Kingdom, and United States of America) Organization for Economic Co-operation and Development (OECD) countries. We analyze the quarterly out-of-sample period of 2008:Q2-2014:Q4, given an in-sample period of 2003:Q1-2008:1Q1, using time series and panel data-based Vector Autoregressive models, with the latter allowing for heterogeneity, and static and dynamic interdependence. It is found that regardless of the forecasting model considered, EPU is useful for forecasting real housing returns. Our results show that, panel data models, especially the Bayesian variants which allow for parameter shrinkage, consistently beat time series autoregressive models suggesting the importance of pooling information when trying to forecast real housing returns.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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