André, ChristopheGil-Alana, Luis A.Gupta, Rangan2014-06-062014Christophe André, Luis A. Gil-Alana & Rangan Gupta (2014) Testing for persistence in housing price-to-income and price-to-rent ratios in 16 OECD countries, Applied Economics, 46:18, 2127-2138, DOI: 10.1080/00036846.2014.8969880003-6846 (print)1466-4283 (online)10.1080/00036846.2014.896988http://hdl.handle.net/2263/40016Housing price-to-income and price-to-rent ratios are among the most widely monitored indicators of housing market conditions. While these ratios tend to fluctuate around a constant level or a mild trend over the long term, they also tend to deviate from these benchmarks for protracted periods. Traditional unit root tests often indicate the presence of a unit root. This article uses the framework of fractional integration to test the persistence of price-to-income and price-to-rent ratios in a sample of 16 OECD countries spanning four decades. The results indicate that the ratios are highly persistent. The possibility that persistence estimates may be affected by structural breaks in the series is also considered, but evidence of such breaks is found only in a very limited number of cases. Policy action may be required if high price-to-income and price-to-rent ratios have adverse social and economic consequences. Policies should be guided by a careful analysis of the factors behind high ratios.en© 2014 Taylor & Francis. This is an electronic version of an article published in Applied Economics, vol. 46, no.18, pp. 2127-2138, 2014. doi : 10.1080/00036846.2014.896988 Applied Economics is available online at : http://www.tandfonline.com/loi/raec20HousingPrice-to-income ratioPrice-to-rent ratioFractional integrationPersistenceLong memoryPostprint Article