LAUSR

This study investigates the change of comovement between the house price and the rent price (hereafter Jeonse price). The methodology used in this study is the SVAR (1) model that assumes the US federal funds rate (FFR) to be block exogenous, and dynamically examines the comovement of the house price and the Jeonse price in the Korean housing market from 2004 to 2018. The main results are as follows. First, we found that the increase in house price is related to the increase in the industrial production index (IPI) and Jeonse price. We also found that the increase in Jeonse price is associated with the increase in the interest rate, IPI, consumer price index (CPI), and house price. Meanwhile, we find that the house price decreases in the 1% upward pressure of domestic and foreign interest rate shock. However, Jeonse price is only influenced by the domestic interest rate shock. It is noted that the increase of IPI and CPI commonly affects both the house price and the Jeonse price. Second, we carried out a rolling regression analysis in order to identify the dynamic casual relationship. We find that the impact of house price and Jeonse price from the IPI and CPI decrease as the interest rate goes up in the global financial market. Finally, we analyze the comovement between the house price and the Jeonse price. We find that the comovement of Jeonse price on the house price is significantly influenced by the change of Jeonse price rather than economic factors, such as interest rate. However, the result shows asymmetry in the house price. The comovement of the house price in relation to the Jeonse price is further influenced by the change of interest rate or economic conditions.