Abstract: This article finds a unit root for both new home and old home prices. Tested by a residual-based technique and a multivariate trace test, these two categories of house prices appear to converge in the long run. New house prices are a weakly exogenous variable. The long-run elasticity of old home prices relative to new home prices is 0.72. There is a feedback mechanism between the two differential markets. The short-run elasticity of old home prices relative to new house prices is about -0.40. The short-run elasticity of new home prices relative to old house prices is 0.76. Both the new and old housing markets may contain a bubble.
Keywords: Housing assets, price, long run, short run, bubble, new home, weak exogeneity.
Title: Interactions between the New Housing Market and the Existing Housing Market in Lanzhou, China
Author: Gao-lu Zou
International Journal of Interdisciplinary Research and Innovations
ISSN 2348-1218 (print), ISSN 2348-1226 (online)
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