Co-integration approach to modeling of housing prices development in Slovakia

Ján Haluška, INFOSTAT – Institute of Informatics and Statistics, Slovak Republic
Mikuláš Cár, National Bank of Slovakia, Slovak Republic

Pages: 18 – 32

Abstract

Housing market in Slovakia is characterized by a relatively short history, during which the development of house prices has experienced a significant volatility. In the precrisis period these prices experienced very dynamic growth, however, the crisis caused their decline, which still continues. While in Slovakia so significant changes in the prices of housing represent undoubtedly a new phenomenon, in developed market economies it is a phenomenon that is repeated periodically. As a result, it has become a subject of econometric modelling already for almost last 20 years. The reason for that is that house prices affect significantly not only the behaviour of economic agents, but also the level of economic activity in related sectors.
Consequently, modelling and forecasting of house prices is of special importance. The aim of this paper is to present the results of empirical analysis of development in housing prices in Slovakia, which were obtained by examining the co-integration of time series of relevant indicators and building an econometric model with error correction term.

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