Author(s) / Editor(s): 
José Eduardo Gómez, Jair Ojeda, Catalina Rey, Natalia Sicard

Testing for Bubbles in Housing Markets: New Results Using a New Method

1
Enero
2013

In the context of financial crises influenced by the development and burst of housing price bubbles, the detection of exuberant behaviors in the financial market and the implementation of early warning diagnosis tests are of vital importance. This paper applies the new method developed by Phillips et al (2012) for detecting bubbles in the Colombian residential property market. The empirical results suggest that currently the country could be experiencing a price bubble, when the CPI and the housing rent index are used as deflators. We do not check the robustness of these results to alternative deflators, such as a household income index and a land price index, due to the lack of monthly data on these indicators.

The findings, recommendations, interpretations and conclusions expressed in this paper are those of the authors and do not necessarily reflect the view of the Banco de la República or its Board of Directors. All remaining errors are our own.

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