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Housing market early warning system : The case of Korea

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Frame of Image e find 15 effective leading indicators. Furthermore, the explanatory power of the housing market crisis composite index, which is determined using the leading indicators, is satisfactory. Hence, the model developed in this paper can be used as the EWS of the Korean housing market.
Keywords: early warning system, signal approach model, housing market crisis composite index
** This paper has been published in European Journal of Scientific Research, July 2011.
1
I. Introduction
Sustaining the stability of real estate prices is necessary in sustaining the stability of the economy as a whole. One of the causes of the recent world economic crises was the US subprime crisis of 2007. Its global aftermath highlights the possibility that housing and financial crises may destroy macroeconomic stability and prosperity (Lunde, 2009). If signals are recognized before crashes, some remedial measures could be adopted and serious economic crises can be avoided. Although there are debates on whether the real estate bubble exists in Korea and in other countries, the collapse of the real estate market cannot be prevented. For one, we do not have appropriate indicators in diagnosing housing market conditions. should be prepared to prevent severe economic crises, or at least to reduce shocks. Preemptive policies may be helpful if they are constructed and executed in efficient ways. However, examples of adequate preemptive housing policies are rare. There are many reasons why housing policies cann


Full Text
Title Housing market early warning system
Similar Titles
Sub Title

The case of Korea

Material Type Reports
Author(English)

Suh, Seoung Hwan; Kim, Kabsung

Publisher

Seoul:Yonsei University

Date 2011
Event

글로벌 금융위기 이후 선진적 주택정책 패러다임 모색

Pages 38
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Macroeconomics
Territorial Development < General
Holding KDI; KDI School of Public Policy and Management

Abstract

In this paper, an early warning system (EWS) for the Korean housing market is constructed. The housing market pressure index (HMPI) is defined as the maximum value of the rates of changes in sales and rental price indexes of the nation and a specific area. The critical value of HMPI is determined using its mean and standard deviation. With the signal approach model, we find 15 effective leading indicators. Furthermore, the explanatory power of the housing market crisis composite index, which is determined using the leading indicators, is satisfactory. Hence, the model developed in this paper can be used as the EWS of the Korean housing market.

User Note

This paper has been published in European Journal of Scientific Research, July 2011.