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Revitalizing the issues, theories and concept of house price bubbles


Zainuddin, Zaemah and Jali, Muhamad Nizam and Gan, Christopher and Ward, Bert (2012) Revitalizing the issues, theories and concept of house price bubbles. In: 3rd International Conference on Business and Economic Research (3rd ICBER 2012), 12-13 March 2012, Golden Flower Hotel, Bandung, Indonesia.

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Abstract

The sharp increase in house prices in several industrialized economies such as the US, UK and Spain (Glindro, et al., 2007) has attracted much attention due to the distorted impact created by the bursting of bubbles in the economy (Gyntleberg & Remolona 2006). Governments and organizations such as the Bank of International Settlement (BIS), International Monetary Fund (IMF) and Organization for Economic Cooperation (OECD) have raised concern about the issues of asset price instability (overshooting the fundamental variables) in the housing market (Gyntleberg & Remolona, 2006).Housing bubbles are believed to be caused by the expectation of an increase in future house prices. The three price expectation theories: rational expectation hypothesis (REH), adaptive expectation hypothesis (AEH) and exogenous expectation hypothesis (EEH) are used to rationalize the behavior of people in creating housing bubbles. It is also believe that people who rejected the existence of housing bubbles follow the supply side economics theory whereas others who believe on the existence of housing price bubbles follow the Keynesians and Shiller theory and Austrian school of thought. Therefore, it is important to understand the theoretical and conceptual framework underlying housing bubbles before suggesting any monetary or fiscal policies that might prevent future housing bubbles crises.

Item Type: Conference or Workshop Item (Paper)
Additional Information: ISBN: 978-967-5705-05-2
Uncontrolled Keywords: House price, bubbles, expectation hypothesis.
Subjects: H Social Sciences > HB Economic Theory
Divisions: School of Economics, Finance & Banking
Depositing User: Dr. Zaemah Zainuddin
Date Deposited: 21 Oct 2014 03:44
Last Modified: 21 Apr 2016 03:43
URI: http://repo.uum.edu.my/id/eprint/12258

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