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on Microeconomic European Issues |
| By: | Marco Caliendo (University of Potsdam, CEPA, BSoE, IZA, DIW, IAB); Nico Pestel (Maastricht University, IZA, CESifo); Rebecca Olthaus (DIW, BSoE, CEPA, University of Potsdam) |
| Abstract: | We investigate the long-term effects of the introduction of the German minimum wage in 2015 and its subsequent increases on regional employment. Using comprehensive survey data, we are able to measure the regional bite of the minimum wage in 2014, just before its introduction, as well as in 2018, before it was raised substantially in several steps. The introduction mainly affected the labour market in East Germany, while the minimum wage increases increasingly affected low-wage regions in West Germany, with about one third of regions changing their (binary) treatment status between 2014 and 2018. We use different specifications and extensions of the canonical difference-in-differences approach, as well as a set of new estimators that allow unbiased effect estimation with a staggered treatment adoption and heterogeneous treatment effects. Our results show a small negative effect on total dependent employment of 0.5%, driven by a significant reduction in marginal employment of 2.4%. The extended specifications suggest additional effects of the minimum wage increases, as well as stronger negative effects for those regions that were strongly affected by the minimum wage in both periods. |
| Keywords: | minimum wage, employment, regional bite |
| JEL: | J23 J31 J38 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:pot:cepadp:80 |
| By: | Winfried Koeniger; Peter Kress; Jonas Lehmann |
| Abstract: | We analyze the novel transactional card expenditure data for Germany and Austria provided by Fable Data. We describe key features of the data in terms of the coverage of expenditure items, payment channels, and the distribution of expenditures across regions and time. We highlight strengths and limitations of the data by comparing them to more consolidated lower-frequency information from external data sources. We find very similar expenditure patterns in Germany and Austria. We illustrate the advantages of the granular, higher-frequency information across expenditure items and locations by analyzing how consumption expenditures evolved during the COVID-19 crisis and beyond. |
| Keywords: | consumption expenditures, transactional data, Austria, Germany |
| JEL: | C80 D12 E21 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11408 |
| By: | Koeniger, Winfried (University of St. Gallen); Kress, Peter (University of St. Gallen); Lehmann, Jonas (University of St. Gallen) |
| Abstract: | We analyze the novel transactional card expenditure data for Germany and Austria provided by Fable Data. We describe key features of the data in terms of the coverage of expenditure items, payment channels, and the distribution of expenditures across regions and time. We highlight strengths and limitations of the data by comparing them to more consolidated lower-frequency information from external data sources. We find very similar expenditure patterns in Germany and Austria. We illustrate the advantages of the granular, higher-frequency information across expenditure items and locations by analyzing how consumption expenditures evolved during the COVID-19 crisis and beyond. |
| Keywords: | consumption expenditures, transactional data, Austria, Germany, COVID-19 |
| JEL: | C80 D12 E21 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17361 |
| By: | Christl, Michael; De Poli, Silvia; Ivaškaitė-Tamošiūnė, Viginta |
| Abstract: | This paper examines the extent to which fiscal policy protected household incomes in the second year of the COVID-19 pandemic in EU countries. Using microsimulation techniques and detailed Eurostat data, we analyse this impact separately for employees and the selfemployed. We show that while on average income protection was similar for employees and the self-employed at the EU level, the heterogeneity both between and within countries was much higher for self-employed households in 2021. For employees, both monetary compensation schemes and unemployment benefits played a similar role in absorbing the income shock, whereas for the self-employed it was mainly monetary compensation schemes and much less so unemployment benefits that stabilised their income. Overall, we find that monetary compensation schemes, together with automatic stabilisers, absorbed a substantial part (67%) of the market income shock in 2021, albeit with a reduced cushioning effect compared to the previous year (74%). Monetary compensation schemes alone account for almost a third of this cushioning effect in 2021. Our paper underlines the importance of targeted policies to ensure comprehensive support for vulnerable households amid ongoing economic uncertainties. |
| Keywords: | COVID-19, Self-employed, Income stabilisation, Microsimulation, EUROMOD |
| JEL: | D31 E24 H24 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1509 |
| By: | Lars Jagemann; Steffen Sebastian; Laurenz Wörner |
| Abstract: | This study investigates the developments of asking rents and public rent indices in a sample of selected German cities. As the rent indices compiled by local authorities serve as regulatory bases for rent controls in Germany, the analysis aims at quantifying the gap between rent prices offered by landlords and price ceilings determined by local rent indices. Using data manually drawn from rent index reports and a nationwide asking rent database, we identify a growing gap, both in absolute and relative terms: while asking rents have risen sharply, official rent indices have been more reserved due in parts to their methodology. This gap appears to be more pronounced in dense cities, while the gap shrinks in more scarcely populated cities. We find the results to be significant over time. Our results suggest that the current regime of rent price indices is ineffective, stressing the need for future reforms. |
| Keywords: | Asking rents; German Housing Market; Rent Control; rent development |
| JEL: | R3 |
| Date: | 2024–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:arz:wpaper:eres2024-182 |
| By: | Peter Parlasca |
| Abstract: | The upswing of the housing markets started in Europe around 2014 even without being hampered by the Covid crisis. However, from summer 2022, signals for the end of the house price bubbles could be seen in many European countries due to Ukraine war related effects supply shortages, increasing inflation and raising interest rates. The down turn affected first Denmark and Germany. In the third quarter 2023 already 10 countries showed house price levels below the previous year.New statistics at the European level and the availability of house sales figures not only in indices for numbers and volume but in physical numbers and the turnover in national currency allows better analysis in particular an earlier detection of downturns and upswings. The development of house prices differed widely between European countries and will be put into perspective with the development of economic activity within Europe.In contrast to the economic developments, housing markets in a small number of European countries did not yet reach the pre-crisis level until 2023 although the upswing of the housing markets started in Europe around 2014. On the other hand, in a significant number of European countries house prices doubled between 2008 and 2023.The data on quarterly house sales (indices of number of transactions and volume) now complemented by additional information seem to be a promising data source to develop projections of the housing market in many European countries. |
| Keywords: | Data Analysis; House Prices; house sales statistics; Real Estate Statistics |
| JEL: | R3 |
| Date: | 2024–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:arz:wpaper:eres2024-151 |
| By: | Giulia Iannone (Gran Sasso Science Institute); Andrea Ascani (Gran Sasso Science Institute); Alessandra Faggian (Gran Sasso Science Institute); Alexandra Tsvetkova (OECD Trento Centre for Local Development) |
| Abstract: | There is an increasing need for today’s economies to be both productive and resilient, but the interplay between these two fundamental factors for economic growth has been neglected in the literature. This paper aims at filling this gap by adopting an evolutionary framework for the joint study of productivity and resilience and proposes a regional taxonomy based on characteristics of the industrial structure. Data on European regions at the NUTS2 level are used first to classify regions as productive and/or resilient and then to analyze how certain regional features, in particular related and unrelated variety, relate to a combined measure of productivity and resilience. Results show that the spatial distribution of productive and resilient regions follows a core– periphery pattern and that related and unrelated variety have significant but heterogeneous effects on regions’ economic performance. |
| Keywords: | productivity, regional resilience, industrial structure, relatedness |
| JEL: | B52 O4 R1 |
| Date: | 2023–12 |
| URL: | https://d.repec.org/n?u=RePEc:ahy:wpaper:wp44 |
| By: | Steinhoff, Brigitte |
| Abstract: | The social and affordable housing situation across Europe is characterised by a high degree of complexity, with a number of challenges emerging from a number of different factors. These include the rising costs of housing, the reduction in public funding, and the evolution of housing models. The term “affordable housing” is defined in different ways in various countries. The effectiveness of these definitions in meeting the needs of different population groups influences the perception of what constitutes affordable housing. The central research questions examine the relationship between national and sub-national definitions of affordable housing and their impact on housing policy outcomes. A mixed-methods approach is employed in four countries, combining desk research, policy analysis, key informant interviews, and stakeholder workshops. The countries under consideration are England, Italy, Poland and the Netherlands. This methodology permits a comprehensive examination of the policy framework and emerging trends within the affordable housing sector. The principal findings demonstrate that the affordable housing sector has become a distinct entity, targeted middle-income households and exhibiting considerable variation across countries. The research underscores the necessity for precise definitions of affordable housing and advocates for augmented government intervention and private sector involvement to enhance housing affordability. |
| Keywords: | affordable housing definition; affordable housing policies; social housing; England; Italy; Poland; The Netherlands |
| JEL: | M14 M38 O18 |
| Date: | 2024–09–06 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122429 |
| By: | ASDRUBALI Pierfederico; CASAS ALJAMA Pablo (European Commission - JRC); CHRISTOU Tryfonas (European Commission - JRC); GARCIA RODRIGUEZ Abian (European Commission - JRC); LAZAROU Nicholas (European Commission - JRC); SALOTTI Simone (European Commission - JRC); WEIERS Georg |
| Abstract: | InvestEU supports the EU's economic, social and environmental objectives, succeeding the European Fund for Strategic Investments. The InvestEU Fund is expected to mobilise more than EUR 372 billion of investment in the EU thanks to the EUR 26.2 billion EU guarantee. This Insight presents the impact of the operations approved by the end of 2023, using the RHOMOLO-EIB model (for a total of almost EUR 205 billion). InvestEU is contributing significantly to economic growth. According to the RHOMOLO-EIB estimates, by 2027, it will create more than 1 million jobs, with a positive change in GDP of +0.80% over the baseline. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc139530 |
| By: | COMPANO Ramon (European Commission - JRC); TESTA Giuseppina; FAKO Peter (European Commission - JRC) |
| Abstract: | This report compares and contrasts the characteristics of unicorns to those of start-up companies in general in Europe, with a particular focus on the influence on the trajectory of these companies of location, industry, and the reputation of venture capitalists investing in them. The analysis is based on a sample of 16, 004 start-up companies headquartered in Europe. Our results shows that unicorns mostly emerge in a limited number of countries and metropolitan areas. They primarily operate in high-technology sectors and tend to attract venture capitalists with established and reputable backgrounds. In contrast, the geographical incidence of lower valued startup companies is less concentrated though still predominantly located in major entrepreneurial hubs. These start-ups are often funded by local VC funds and many of them receive government support. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc132791 |
| By: | Dickson, Matt (University of Bath); Donnelly, Michael (University of Bath); Kameshwara, Kalyan Kumar (Westminster Business School); Lazetic, Predrag (University of Bath) |
| Abstract: | The UK has one of the highest proportions of tertiary educated workers in Europe but also one of the highest rates of graduate underemployment. Little is known however about the extent to which there is a scarring effect of early graduate underemployment on future labour market outcomes. In this paper, we examine the effect of early underemployment using data on 67, 000 graduates from undergraduate degrees in the UK in 2013. Labour market outcomes at six-months and 42-months post-graduation are linked to administrative records covering higher education, prior attainment, demographics and family background. We find that compared to being in a graduate job six-months post-graduation, early experience of underemployment increases the probability of being underemployed three years later by 0.24. Oster bounds analysis suggests that the causal effect of early underemployment on later underemployment is at least +0.18. This is a large effect relative to the base risk of underemployment at 42-months for those in a graduate job at six-months which is just 0.09. We highlight important implications of these findings, with arguments from both equity and efficiency for policies to help graduates to attain graduate level jobs. |
| Keywords: | underemployment, graduates, higher education, persistence, United Kingdom |
| JEL: | I23 I26 J24 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17364 |
| By: | Ugur Aytun (Department of Economics, Middle East Technical University, Ankara, Turkey); Julian Hinz (Faculty of Business Administration and Economics, Bielefeld University , Bielefeld, Germany); Cem Ozguzel (Centre d'Economie de la Sorbonne, Paris School of Economics, Paris, France) |
| Abstract: | In November 2015, Turkey's unexpected downing of a Russian military jet in Syria prompted Russia to impose a swift and comprehensive embargo on specific Turkish exports. This study leverages this quasi-natural experiment to estimate both the immediate and longer-term effects of the imposition and subsequent lifting of these sanctions. Utilizing administrative data encompassing all Turkish exporters, we first examine the impact on trade at the firm level, assessing the direct effects of the embargo, the redirection of trade to alternative markets, and the circumvention through other products. Second, we investigate broader repercussions on domestic operations, including firms' sales, procurement, and employment. Our findings show that while the embargo caused immediate and substantial declines in exports of affected products to Russia, firms partially mitigated these losses through trade diversion. Although relative trade patterns normalized post-sanctions, absolute trade values remained subdued. The analysis reveals that affected firms experienced declines in domestic sales and supplier relationships, with temporary disruptions in employment. However, most negative effects dissipated following the embargo's removal, except for some persistent reductions in procurement and supplier links. These results contribute to the understanding of sanctions' broader economic implications and the resilience of firms facing trade disruption. |
| Keywords: | Sanctions, Embargoes, Firm-level Effects, Gravity |
| JEL: | F10 F13 F14 F51 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:met:wpaper:2404 |
| By: | Matthias Efing; Stefanie Ehmann; Patrick Kampkötter; Raphael Moritz |
| Abstract: | This paper examines the integration of ESG performance metrics into executive compensation using a detailed panel dataset of European executives. Despite becoming more widespread, most ESG metrics are largely discretionary, carry immaterial weights in payout calculations, and contribute little to executive pay risk. Such ESG metrics with arguably weak incentive power are common in financial firms and large companies, particularly for their most visible executives, which seems consistent with greenwashing. In contrast, binding ESG metrics with significant weights, which have potential to influence incentives, are only found in sectors with a large environmental footprint. |
| Keywords: | executive compensation, ESG, ESG metrics, ESG contracting, CSR contracting, sustainability, incentive contracting, optimal contracts |
| JEL: | G30 G35 J33 M12 M52 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11407 |
| By: | Anett Wins; Marcelo Cajias; Rebecca Restle |
| Abstract: | Using artificial intelligence (AI) algorithms, modern location analysis evaluates attractiveness almost in real time. In this paper we explore the relationship between amenities and residential asking rents in several large European cities. The study introduces the Amenities Magnet Score (AMS) differentiated by seven basic living needs as crucial metric for assessing and evaluating the attractiveness of urban locations. Research results emphasize the critical role of amenities and their impact on residential rental prices: It highlights that the AMS directly correlates with rental prices in European cities, with higher AMS associated with rental premiums. Different types of amenities affect rental prices variably, and there are threshold effects where rental premiums stabilize or sharply increase as the AMS reaches certain thresholds, highlighting the nuanced relationship between amenities and rental values.Findings offer valuable insights for real estate investors seeking to understand and navigate the dynamics of urban rental markets and developing strategies for asset allocation that capitalize on the demand for amenities. |
| Keywords: | AI; Amenities Magnet Score (AMS); GAM; residential rental pricing |
| JEL: | R3 |
| Date: | 2024–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:arz:wpaper:eres2024-191 |
| By: | Sandrine Michel (UMR ART-Dev - Acteurs, Ressources et Territoires dans le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - UPVM - Université Paul-Valéry - Montpellier 3 - UPVD - Université de Perpignan Via Domitia - CNRS - Centre National de la Recherche Scientifique - UM - Université de Montpellier); Lauren Caquant; François Benhmad (MRE - Montpellier Recherche en Economie - UM - Université de Montpellier) |
| Abstract: | The anthropogenic nature of GHG emissions is now accepted. Standards, taxes and markets: economists put forward a variety of instruments to fight against climate warming. In 1997, the Kyoto Protocol institutionalized market instruments to tackle climate change. A market for emissions permits would offer several advantages. It would provide a price signal to economic agents, which would be the best way to ensure effective decentralized decision-making for the energy transition. In a quantitatively constrained system of quotas, it would also enable pollution control efforts to be shared out, minimizing the collective costs of reducing emissions (Crocker 1966, Dales 1968, Montgomerry 1972). In 2005, the European Commission created the first binding carbon market (De Perthuis 2008). The European Emission Trading System (EU-ETS) is a market for tradable emissions permits that sets national caps on CO2 emissions (Gollier & Tirole, 2015), divided between different installations. For each, carbon quota holders must arbitrate between investing in clean production modes, buying quotas on the EU ETS to ensure compliance, or holding them for a later period. From the outset, the power generation sector received the majority of allocations (Cartel et al. 2017). This production emits a significant amount of CO2, which varies according to the quantity produced and the fuel used. We also note that electricity prices now include European capacities, which are part of the interconnected grid. In this context, European prices are still largely dependent on the price of fossil fuels, which play a major role in national power mixes, but also on the price of carbon. French electricity prices are linked to the European electricity market, and therefore to the electricity mixes of the other countries in the zone. This is why, despite a highly decarbonized energy mix, the question of its potential sensitivity to the EU ETS price signal is open. With European interconnection, the price of allowances on the EU-ETS market could be reflected in the price of French electricity, and in its expectations on futures markets. If this were the case, then the highly institutional nature of the electricity and carbon markets would have enabled price formation, capable of supporting the decarbonization of European electricity mixes, wherever the electrons are consumed. |
| Keywords: | Energy and Environment, Energy Demand, Energy Supply, Prices, EU ETS |
| Date: | 2024–06–25 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04723704 |
| By: | WOOLFORD Jayne (European Commission - JRC); LALANNE Marie (European Commission - JRC) |
| Abstract: | European Regional Development Fund (ERDF) programming in the 2021-2027 financial period rec-ognises the role of human capital in place-based approaches to territorial development and innova-tive transformation, allowing for investment in skills for smart specialisation, industrial transition and entrepreneurship. This research quantifies the amount of investment earmarked across the EU-27 for this, alongside similar investments under the temporary Recovery and Resilience Facility (RRF), acknowledging the importance, and yet complexity, of ensuring complementarity between the funding streams. Whilst the legal basis for both resides in the Union’s goal of strengthening eco-nomic, social and territorial cohesion and reducing disparities, the design and implementation of the two instruments reflects different governance models, performance frameworks, policy priorities and actors. The analysis aims to capture how these two instruments support skills development rel-evant to the twin transitions and smart specialisation domains across heterogeneous socio-economic and institutional territories within the context of the European Semester recommenda-tions. However, it provides an overview of proposed investment at the point of adoption of the two sets of programmes in 2022 and 2023, recognising that the results and impact of the allocations, and their integration and connection with their local innovation ecosystem, will depend upon the ter-ritorial context, the projects and beneficiaries selected and implementation approaches. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc139050 |
| By: | POKROPEK Artur |
| Abstract: | STEM education, encompassing science, technology, engineering, and mathematics, has evolved significantly due to technological and societal shifts. Integrated STEM and STEAM (adding arts) approaches are becoming more spoken, focusing on developing 21st-century skills like creativity and problem-solving. Although, from a broad perspective, integrated STE(A)M approaches are appealing and theoretically sound, their inconsistent definitions and operationalizations complicate curriculum design, evaluation, and scientific studies. The scarcity of research on STEM education, particularly in the European context, underscores the urgent need for more evidence-based practices. While international large-scale assessments could provide cross-country insights into STEM education, more well-designed studies are needed to understand the effectiveness of STEM and STEAM education, particularly in the European context. Promoting STEM research and securing adequate funding sources for such studies is essential to gaining a deeper understanding of STEM education and guiding its development based on more robust empirical foundations. Ultimately, such efforts will help shape a more effective and inclusive STEM education system responsive to the evolving demands of the modern workforce and society. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc138618 |
| By: | Dominik Wasiluk |
| Abstract: | AI-based automated valuation models (AVMs) exhibit best among all types of AVMs and truly commercially-viable qualities. Therefore for many professionals the use of AI algorithms for property valuation seems to be a natural progress and a necessity in this field. However the application of AI to property valuation raises a number of questions of a legal nature. First and foremost, is the use of AVM by appraisers to perform valuation reports allowed under current legal regulations? In my paper, I will present an analysis of Polish legal provisions regarding real estate valuation and prove that, unlike in many other European countries, they have almost explicitly allowed the use of AVMs by appraisers, including those based on artificial intelligence, for many years. In the second part of the report, I will present my conclusions on the professional liability of an appraiser for possible AVM errors. In order to investigate both research problems, I use linguistic and hermeneutical analysis of law, which I supplement with sociological methods - in-depth interviews with Polish property appraisers. Finally, based on an extensive literature review and international industry standards, I will present a proposal on how an appraiser should assess the quality of an AI-based AVM, both before and during its use. |
| Keywords: | Artificial Intelligence; Automated Valuation Models; Property Valuation; Real estate appraisers |
| JEL: | R3 |
| Date: | 2024–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:arz:wpaper:eres2024-184 |
| By: | Alexandre Truc (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur) |
| Abstract: | In June of 2010, a special issue in the Journal of Economic Methodology was introduced with the question: "Neuroeconomics: Hype or Hope?" (Marchionni and Vromen, 2010). More than ten years later, it is time to provide an answer. Using a variety of sources ranging from Web of Science to EconLit, I assess the importance of neuroeconomics as a research program in economics. I show that after a rapid increase in interest in the early 2000s, neuroeconomics decreased in importance beginning in the 2010s, especially compared with the continuing rise of behavioral economics. Here, I explore a number of explanations for this decline in interest. Then, I compare neuroeconomics with behavioral economics to emphasize key points of divergence in how these programs were constructed at the frontiers of economics. Most notably, I show that neuroeconomists were more confrontational in their approach to economics, more focused on programmatic writings with few theoretical contributions, and importantly, more oriented towards neuroscience rather than economics. |
| Abstract: | En juin 2010, un numéro spécial du Journal of Economic Methodology soulevait la question suivante : « Neuroeconomics: Hype or Hope ? » (Marchionni et Vromen, 2010). Plus de dix ans après, il est temps de proposer une réponse à cette question. En m'appuyant sur diverses sources, allant de Web of Science à EconLit, j'évalue l'importance de la neuroéconomie en tant que programme de recherche en sciences économiques. Je montre que, après une montée rapide de l'intérêt pour la neuroéconomie au début des années 2000, l'importance de la neuroéconomie a baissé dans les années 2010, notamment en comparaison à l'essor ininterrompu de l'économie comportementale. Dans cet article, j'explore un certain nombre d'explications pour cette perte d'intérêt. Ensuite, je compare neuroéconomie et économie comportementale pour souligner des différences essentielles dans la manière dont ces deux programmes ont été construit à la frontière des sciences économiques. Plus particulièrement, je montre que les neuroéconomistes ont été plus conflictuels dans leur rapport aux sciences économiques, plus actifs dans la production de contributions programmatiques que théoriques, et plus tournés vers le dialogue avec les neurosciences qu'avec les sciences économiques. |
| Keywords: | interdisciplinarity, neuroeconomics, behavioral economics, psychology, neuroscience, interdisciplinarité, neuroéconomie, économie comportementale, psychologie, neurosciences |
| Date: | 2023–06–01 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04719266 |
| By: | Jonas Hurm; Johannes Raabe; Sebastian Stefani |
| Abstract: | The Swedish residential real estate market has undergone significant trans- formations over the years, with historical structural shifts driven by evolving regulations leading to market fluctuations. Analyzing these changes, we can categorize the market’s evolution into four distinct phases: pre-1993 marked by market liberalization, the 2008 global financial and economic crisis, and the 2016 increase in the main refinancing rate. Understanding these historical mile- stones is crucial for shaping our perspective on the current state of the market and forecasting its future trajectory.Key determinants influencing the Swedish real estate market are drawn from literature, encompassing factors such as banks’ refinancing rates, household in- come, welfare indicators, and price factors. These determinants have historically played crucial roles in shaping market trends and dynamics. The question arises: do these determinants persist over time, and can we derive predictive models based on this knowledge? Of particular interest is the proactive stance taken by the Swedish central bank, which raised the main refinancing rate earlier than its European and American counterparts. This divergence raises intrigu- ing questions about the unique characteristics of the Swedish market and how it responds to external economic factors.A hypothesis emerges: despite substantial changes, the identified determi- nants retain their long-term significance in influencing the Swedish real estate market. This hypothesis forms the basis for our exploration into the continu- ity of these determinants amidst evolving economic landscapes and regulatory frameworks. Understanding the historical context and determinants allows us to navigate the complexities of the market. It also provides a foundation for devel- oping robust forecasting models that can adapt to changing circumstances. As we delve into this exploration, we aim to unravel the enduring factors that shape the Swedish real estate landscape, contributing valuable insights to stakeholders navigating this dynamic and resilient market.Our research focuses on the Swedish residential housing market due to its distinct features, notably diverse transition processes. This market oers a com- pelling case study due to its unique blend of regulatory frameworks, monetary policies, and historical trends. By selecting this dataset, we aim to validate robust methodologies while gaining insights into a market that holds relevance on both national and international scales.Our data modeling approach involves a systematic application of Vector Auto-regressive (VAR) and Error Correction Model (ECM) frameworks, as out- lined in existing literature. Simultaneously, we constructed these models, align- ing with established methodologies, to gain insights into the complex relation- ships within the dataset. The VAR models capture dynamic interdependence’s among variables over time, providing a comprehensive understanding of the data’s behavior. In parallel, the ECM models address long-term equilibrium re- lationships and short-term dynamics, contributing to a nuanced understanding of underlying patterns.The integration of these models does not involve providing them with data in the traditional sense but rather focuses on their structural construction and alignment with recognized methodologies. This methodical approach allows us to uncover relationships, trends, and patterns within the dataset without ex- plicitly mentioning the providing process. By adopting this approach, we aim to derive robust insights and contribute to the advancement of knowledge within the domain, adhering to well-established methodologies in the literature.The results of our models underscore the enduring significance of determi- nants in the market. Through a comprehensive analysis of both the aggregate and individual phases within the models, we observed that the identified influ- encing factors continue to play a pivotal role in shaping market dynamics. These findings serve as the foundation for our aspiration to construct more precise and reliable forecast models.The holistic analysis enabled us to track the dynamics of determinants across various phases. Despite changes in the market over time, our models demon- strate that certain influencing factors remain consistently eective. This under- standing of long-term stability empowers us to develop informed forecast models based on reliable data and structured assumptions.Our primary focus now is to build precise forecast models based on the in- sights gained from our existing models. These models aim not only to consider current market conditions but also to integrate long-term stability and histori- cal development patterns. By employing rigorous methodologies and carefully incorporating the identified determinants, we aim to create models that are not only robust but also future-oriented. Our goal is to contribute valuable insights to strategic decision-making in an ever-evolving market environment through these forecast models.In an upcoming study, our aim is to develop a model for forecasting the development of net asset values of REIT’s and the market capitalization of shares of real estate companies in relation to the Swedish and later the European economic area. This requires modeling the performance of commercial and residential real estate and thus transferring the models to the commercial sector. |
| Keywords: | Prediction; Residential housing market; Sweden; VAR and ECM |
| JEL: | R3 |
| Date: | 2024–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:arz:wpaper:eres2024-187 |