A spatio-temporal study of regional house prices in Sweden

This paper uses a recently developed methodology to investigate the spatial and temporal diffusion patterns of a shock to the regional house markets in Sweden. We model the change in regional house prices such that they are allowed to be contemporaneously affected by price changes in the dominant region – Stockholm - as well as being allowed to be subject to a cointegrated relationship with its neighboring regions and Stockholm. Own lagged price effects as well as neighboring lag effects are also considered. We find that shocks to the Stockholm housing market contemporaneously affects Malmo and Gothenburg the most, leading us to believe that the relationship between regional housing markets in Sweden best can be explained by homogenous economic conditions within the regions