Inflation, Interest Rate and Income Effects on Housing Price in the U.K.

This paper’s objective is to give you an introduction into conducting an empirical research and

presenting the results of that research in a professionally written paper. To carry out this

research, you will identify an economic relationship (or a demand equation) between variables

that are interesting to you. In your paper, you will describe this relationship and present a lucid

argument for the importance of a better understanding of this relationship. And then, collecting

appropriate data, you will empirically estimate this relationship along with all of the appropriate

goodness of fit tests and statistics. Finally, you will analyze and report the results of your

empirical estimation with particular emphasis on how these results are important and useful for a

manager of a business enterprise or an economic agent faced with a choice. Your final report

must contain the following sections:

INSTRUCTIONS : This final report should add more five pages on the progress report , not

including tables and diagrams (plots of your data, if you are including them).

a. Brief Introduction and Literature Review – Discuss and flesh out the motivation for the

economic relationship you are estimating in this paper. While you do not have to go

into lengthy discussions about the underlying economic theory, it should be

sufficiently detailed so the relationship you are estimating is made clear to the

reader. In this section, you should include a short discussion of the literature. While

it does not need to be exhaustive, pick three to five papers to frame your research

and place it in context.

b. Data Description – Give a brief discussion of the data and how/where they were

collected. At the minimum, you should note the time range of the data, scales of the

data (i.e., data in millions of dollars or thousands of tons, etc.), and any notable

events that may be applicable to your data set (such as change in corporate

ownership or natural disasters, etc.). Also, you should describe the institutional

setting of your data. E.g., you should discuss the business with an eye towards how

some unique industry practices might have an impact on the specific data that you

had collected. Also include a table of basic descriptive statistics for your data. Your

description of the data would surely be aided by carefully drawn charts of your data.

c. Regression Model and Results – Carefully develop your regression model. You must

support your model with a “story” of why the right hand side variables you include

are important and/or with the support of the relevant economic theory (including

your hypotheses). Report your regression results in an equation form (see the

textbook for how this is done) or a table form. Be sure to report all relevant

statistics: coefficient estimates, standard error, R2, various test statistics, etc.

d. Discussion and Diagnostic Tests – Carry out all appropriate “goodness of fit” tests and

briefly discuss the “fit” of your regression equation. Which form is the preferred:

linear or log-linear? Explain your conclusion. Finally, carefully describe what your

empirical results are telling you about your hypothesized economic relationship that

you had outlined in part a.

e. Conclusion – What does your regression tell you about the demand in the industry? What

more can be done in the future?