The purpose of this study is to assess the symmetric and asymmetric impact of a measure of policy uncertainty on house permits issued in each state of the USA.
To assess the symmetric effects, the authors use Pesaran et al.’s (2001) linear autoregressive distributed lag (ARDL) approach to error-correction modeling. To assess the asymmetric effects, they rely upon Shin et al.’s (2014) nonlinear ARDL approach to error-correction modeling. Both approaches have the advantage of producing short-run and long-run effects in one step.
The authors find short-run symmetric effects of policy uncertainty on house permits issued in 22 states that lasted into the long run in three states only. However, the numbers were much higher when they estimated the possibility of asymmetric effects of policy uncertainty. Indeed, they found short-run asymmetric effects in 38 states and long-run asymmetric effects in 18 states.
Some previous studies assessed the effects of a measure of policy uncertainty on house prices. In this paper, the authors extend the same analysis to the supply side of the housing market by assessing the effects of policy uncertainty on house permits in each state of the USA.
