The paper attempts to provide, for housing markets, evidence of "shift-contagion" at the international level, i. e. regime shifts in the transmission of asset prices during crisis periods. The focus is in particular on UK and Spain. We use a Markov Switching FAVAR framework and regime-dependent impulse response functions. The `Crisis' regime which we identify endogenously is shown to also correspond to an exogenously determined index of frequency of financial crises in OECD countries, which peaked in the early 1990s and in the more recent Subprime crisis. Furthermore, we find that the response of domestic house price to a shock to a common (global) house price factor during a `Crisis' regime is relatively more amplified than in a `Normal' (more tranquil) regime. Less compelling evidence is found for France.
Olivier de Bandt and Sheheryar Malik
Classification JEL : R31,G15,C32
Keywords : contagion, housing market, regime shifts, FAVAR model
Updated on: 06/12/2018 10:59