Constructing an Early Warning System to Predict the Speculative House Price Bubble in the Current Western- European Housing Marke
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2019-08-16
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en
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Abstract
In this paper, the author constructs an early warning system to predict speculative house price bubbles in the Netherlands, Slovenia, Belgium, and Slovenia in the period between 2011 and 2018. A speculative house price bubble is a situation where the actual house price index is structurally different from the fundamental house price index. First, the speculative bubble chronology is obtained, that is necessary to identify speculative bubble periods. The speculative bubbles are identified by combining two techniques, the fundamental and filter technique. The two techniques are used as criteria and only when both criteria hold, a speculative bubble is identified. Subsequently, the speculative bubbles are tested to see if they can be predicted. It is done by applying the random-effect logit and probit approaches. The results show that neither of the approaches has the required prediction accuracy for the early warning system to function as an accurate predictor of speculative bubbles in the housing market. In conclusion, the constructed early warning system cannot be used by policymakers to help to forecast future speculative house price bubbles.
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Faculteit der Managementwetenschappen