Dynamics in the rural housing markets : A Vector Autoregressive approach to the ripple effect in Sweden

Abstract: This thesis examines the “ripple effect” and its presence on a regional level within Swedish counties. This effect implies that central housing markets “lead” the fluctuations in prices, and other local markets follow with a time lag. Vector auto regressive methods are used to capture the effects of real house price changes on single-family houses during the years 1984 to 2014, within Sweden’s large and sparsely populated counties. The results confirms the presence of this effect between Stockholm and regional capitals, but cannot confirm that this effect continuous from regional capitals to their respective neighbouring municipalities. But the results indicate that there are reasons to believe that the “ripple effect” is there, but that there are some internal dynamics within some counties that this thesis cannot explain and that need further research.