Convergence in house prices across OECD countries: A panel data analysis

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JEL classification

• Housing Supply and Markets
• Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models

Keywords

convergence, House prices, Panel data analysis, System-GMM

Abstract

This study examines whether housing prices converged in OECD countries over the 1996–2015 period. The unconditional and conditional convergence hypotheses are tested via the system-GMM method using five-year span panel data of twenty OECD countries. The results reveal that there exists a significant convergence process within this country group. To test the conditional convergence hypothesis, the convergence equation is estimated also with some control variables that may reflect market activity and demand side impacts such as income level, construction, unemployment rate, permits for dwellings and share prices. The findings show that the speed of convergence is even higher when the above-mentioned variables are controlled.