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Proceedings of Rijeka Faculty of Economics : Journal of Economics and Business, Vol.34 No.1 June 2016. -

The purpose of this investigation is to research the causal link between economic

policy uncertainty EPU and the housing returns HR in Germany. In the estimated

vector autoregressive models, we test its stability and find the short-run relationship

between HR and EPU is unstable. As a result, a time-varying approach bootstrap

rolling window causality test is utilized to revisit the dynamic causal link, and we find

EPU has no impact on HR due to the stability of the real estate market in Germany.

HR does not have significant effects on EPU in most time periods. However, significant

feedback in several sub-periods both positive and negative are found from HR to

EPU, which indicates the causal link from HR to EPU varies over time. The empirical

results do not support the general equilibrium model of government policy choices

that indicate EPU does not play a role in the real estate market. The basic conclusion

is that the real estate market shows its stability due to the social welfare nature and

the rational institutional arrangement of the real estate in Germany, and the real

estate market also shows its importance that it has significant effect on the economic

policy choice in some periods when negative external shocks occur.

Housing returns; Economic Policy Uncertainty; time-varying causality

Autor: David Su - ; Department of Finance, Ocean University of China, Shandong, China Xin Li - ; Department of Finance, Ocean University



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