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ABSTRACT: Past studies have shown that changes in the house price of a region may transmit to its neighbouring regions. The transmission mechanism may follow spatial and temporal diffusion processes. This paper investigates such regional housing market dynamics and interactions among local housing sub-markets in Taipei. The analysis is based on a panel data framework and spatial panel models using annual data on median residential land prices from 41 Taipei sub-markets over the period from 1992 to 2010. The empirical analysis suggests that spatial dependence plays a significant role in interactions among regional housing markets. The results are strongly robust across several model specifications and regions controlling for time fixed effects and space-time covariance. These findings have significant implications for urban spatial planning and efficient use of public resources in mega-urban areas. JEL CLASSIFICATIONS: C21; C23; R12; H50.
Nanda et al. (Mon,) studied this question.