This paper analyses comovement in housing prices across the Euro area. We use techniques based on the concepts of fractional integration and cointegration. Our results indicate that all the individual log-real price indices display orders of integration which are above one, implying long memory in their corresponding growth rates. Further, looking at the cointegration relationships, we observe that the series for the Euro area is cointegrated with those of Belgium, Germany and France. Focusing on the individual countries, we find cointegration relationships between Belgium and Spain, Belgium and the Netherlands, Germany and Spain, Germany and Ireland, France and Spain, and Ireland and the Netherlands. Other bilateral cointegration relationships can either clearly be rejected or the results are ambiguous. Finally, prices in Germany seem to move in the opposite direction from other countries, which may be related to capital flows associated with current account imbalances.
Comovement in Euro area housing prices: A fractional cointegration approach
Luis A. Gil-Alaña
Urban Studies Vol. 52, No. 16