An interdependence analysis of Australian house prices using variance decomposition

Purpose - The purpose of this paper is to analyse the interdependencies of the house price growth rates in Australian capital cities.
Design/methodology/approach - A vector autoregression model and variance decomposition are introduced to estimate and interpret the interdependences among the growth rates of regional house prices in Australia.
Findings - The results suggest the eight capital cities can be divided into three groups: Sydney and Melbourne; Canberra, Adelaide and Brisbane; and Hobart, Perth and Darwin.
Originality/value - Based on the structural vector autoregression model, this research develops an innovative interdependence analysis approach of regional house prices based on a variance decomposition method.