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Granger Causality: House Prices in Capital Cities of Australia

Granger Causality: House Prices in Capital Cities of Australia. SERGUEI MIKHAILITCHENKO Australian College of Kuwait, Kuwait. Study Outline:. House prices in capital cities of Australia 1980-2005 Granger causality tests Non-cointegrated series Cointegrated series

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Granger Causality: House Prices in Capital Cities of Australia

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  1. Granger Causality: House Prices in Capital Cities of Australia SERGUEI MIKHAILITCHENKO Australian College of Kuwait, Kuwait

  2. Study Outline: • House prices in capital cities of Australia 1980-2005 • Granger causality tests • Non-cointegrated series • Cointegrated series • Cointegration and causality of house prices in Australian capital cities • Unit Root tests • Cointegration tests • Granger causality tests • Comparison of results with previous studies and conclusions

  3. Australian House Prices 1980-2005 House price index, Australian capital cities 1980-2005 Source: Real Estate Institute of Australia

  4. Australian House Prices 1980-2005

  5. Granger Causality Tests • I(0) series To test whether X causes Y H0: 1 =β2=…p = 0 Ha: at least one i ≠ 0 And to test whether Y causes X H0:1=2=…=p=0 Ha: at least one iis not zero

  6. Granger Causality Tests • Cointegrated I(1) series To test whether X causes Y H0: 1 =β2=…p = 0 Ha: at least one i ≠ 0 And to test whether Y causes X H0:1=2=…=p=0 Ha: at least one iis not zero

  7. Unit Root Test Results

  8. Unit Root Test Results

  9. Cointegration Test Results Trace statistics, nominal house prices Maximum Eigenvalues, nominal house prices *, ** denotes significance at 5 and 1 percent respectively ( ) the number of lags in brackets

  10. Granger Causality Test Results

  11. Comparison of Results Causal relationships between nominal house prices in capital cities, Australia

  12. Policy Implications • The existence of causal relationships between house prices implies that the outcomes of the housing policies implemented by the state governments are not independent of the developments in housing markets interstate.

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