Detail publikace

Pavlicek, J. & Kristoufek, L.: Online searches as a leading indicator of new mortgages in the UK

Autor: prof. PhDr. Ladislav Krištoufek Ph.D.,
Jaroslav Pavlíček M.A.,
Typ: Submissions
Rok: 2020
Číslo: 0
Publikováno v: (revised and resubmitted) Journal of Housing Economics
Místo vydání:
Klíčová slova: mortgage, online data, Google Trends, forecasting
JEL kódy:
Abstrakt: The internet has become the primary source of information for most of the population in modern economies, and as such, it provides an enormous amount of readily available data. Among these are the data on the internet search queries, which have been shown to improve forecasting and nowcasting models for various economic and financial series. In the aftermath of the global financial crisis, modeling and forecasting mortgage demand and subsequent approvals have become a central issue in the banking sector as well as for governments and regulators. Here, we provide new insights into the dynamics of the UK mortgage market, specifically the volume of new mortgages measured by mortgage approvals. Because online searches are expected to be one of the last steps before a customer's actual application for a large share of the population, intuitive utility of such data as a leading indicator is appealing for economic research. While the volume of new mortgages is certainly driven by multiple different factors, we test whether or how models and forecasts of this market can be improved by incorporating the online searches of potential mortgage applicants. We compare two baseline models -- an autoregressive model and a structural model with relevant macroeconomic variables -- with their extensions utilizing the online searches on Google. We find that the extended models better explain the number of new mortgage approvals, markedly improve their nowcasting and forecasting performance, especially in terms of their directional accuracy.




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