Does tourism drive house prices in the OECD economies? Evidence from augmented mean group estimator

Abstract

This paper provides cross-country macro-economic level evidence on the impact of tourism on house prices based on a panel of 20 OECD countries during the period 1995 to 2014. In its analysis, the study also accounts for institutional quality, banking credit, per capita income and income inequality. We employ Augmented Mean Group (AMG) estimator for the empirical investigation. The findings derived from AMG are robust and reliable as it accounts for cross-sectional dependence and allows for heterogeneous slope coefficients across panel members. The results show that tourism and its interaction with income inequality have a significant positive impact on house prices in the OECD economies. The findings also suggest that the growth in banking credit and per capita income further increases house prices, while institutional quality has the opposite impact. These findings offer new policy insights and practical knowledge.