Abstract
We examine the long-run convergence across 12 UK regional house prices using a pairwise approach. The time period spans from 1983:1 to 2012:4. Linear, nonlinear and asymmetric unit root tests are considered for assessing the stationarity of all possible pairs. The test statistic for convergence is based on the percentage of unit root test rejections across all regional house price differentials. The percent of the pairs that reject the null increase from 6% in the linear ADF case to 53% for the nonlinear unit root. Probit analysis reveals that house price differentials in the South are more likely to be stationary and as a result tend to converge more compared to the North.
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Notes
This is usually the case when panel unit root tests are employed.
See Chandler and Disney (2014) for a comparison of the different indices.
Assessment of the demeaned data is carried out following KSS. Evidence of convergence based only on demeaned data should be treated with caution.
Lopes (2016) proposes replacing trend stationarity with level stationarity as the alternative hypothesis in unit root tests for (income) convergence.
The South pairs are EA-LD, EA-SE, EA-SW, LD-SE, SE-SW and the North pairs are: NE-SC, NE-NW, NE-IR, NW-YR, NW-SC, NW-IR, YR-SC, YR-IR, SC-IR.
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We would like to thanks participants in the EEFS 2015 conference that took place in Brussels (CEPS).
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Kyriazakou, E., Panagiotidis, T. A nonlinear pairwise approach for the convergence of UK regional house prices. Int Econ Econ Policy 15, 467–481 (2018). https://doi.org/10.1007/s10368-017-0399-x
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DOI: https://doi.org/10.1007/s10368-017-0399-x