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Please use this identifier to cite or link to this item: http://bura.brunel.ac.uk/handle/2438/5041

Title: US disposable personal income and housing price index: A fractional integration analysis
Authors: Caporale, GM
Gil-Alana, LA
Keywords: Personal disposable income
House price index
Fractional integration
Publication Date: 2010
Publisher: Brunel University
Citation: Economics and Finance Working Paper, Brunel University, 10-24
Abstract: This paper examines the relationship between US disposable personal income (DPI) and house price index (HPI) during the last twenty years applying fractional integration and long-range dependence techniques to monthly data from January 1991 to July 2010. The empirical findings indicate that the stochastic properties of the two series are uch that cointegration cannot hold between them, as mean reversion occurs in the case of DPI but not of HPI. Also, recursive analysis shows that the estimated fractional parameter is relatively stable over time for DPI whilst it increases throughout the sample for HPI. Interestingly, the estimates tend to converge toward the unit root case fter 2008 once the bubble had burst. The implications for explaining the recent financial crisis and choosing appropriate policy actions are discussed.
Sponsorship: The second named-author gratefully acknowledges financial support from the Ministerio de Ciencia y TecnologĂ­a (ECO2008-03035 ECON Y FINANZAS, Spain) and from a PIUNA Project from the University of Navarra.
URI: http://bura.brunel.ac.uk/handle/2438/5041
Appears in Collections:School of Social Sciences Research Papers
Economics and Finance

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