A model-free test of rational bubbles: an application to the US housing market

• Sergi Basco ^[2] ; Maximilian Schäfer-i-Paradís ^[1]
  1. [1] Universitat Autònoma de Barcelona

     Universitat Autònoma de Barcelona

     Barcelona, España

     
  2. [2] UniversitatBarcelona
• Localización: Economics and Business Letters, ISSN-e 2254-4380, Vol. 14, Nº. 2, 2025, págs. 117-125
• Idioma: inglés
• Enlaces
  • Texto completo (pdf)
• Resumen

  • The recent house price appreciation in the United States has renewed the interest in determining the existence of” bubbles”. We provide a model-free test of rational bubbles and apply it to the U.S. housing market. We derive that there exists a bubble whenan increase in the current account deficit raises house prices and they are exacerbated in housing supply inelastic municipalities. We apply this test using metropolitan statistical area data between 1990 and 2022. We consider three suspect episodes: (i) 1996-2000, (ii) 2002-2006 and (ii) 2020-22. Our findings are consistent with the existence of only one housing bubble episode (2002-06). Astrengthof this test is that it can be easily applied in real time in any country.