Author: Sojung Hwang(Inha University), Hyunduk Suh(Inha University)

We estimate housing policy uncertainty (HPU) in Korea, employing the economic policy uncertainty (EPU) method by Baker et al. (2016). The uncertainty index is measured by the frequency of texts in Korean newspapers that imply housing policy uncertainty during 1997-2022. The HPU index was high during the presidences of Roh Moo-hyun and Lee Myung-bak and has risen again since 2020. Also, HPU tends to increase when there are large housing market policy announcements, political instability, or changes in administrative regimes. We also analyze the effects of HPU on housing markets by estimating a vector autoregressive (VAR) model. The VAR results suggest that a rise in HPU negatively affects housing prices and residential construction but increases housing price volatility. Meanwhile, a positive shock in housing prices endogenously raises HPU, which suggests that uncertainty was typically more significant under policies that aim to stabilize the housing market and prevent from overheating.