The effect of demographics on the Japanese housing market

Japanese housing price determination mechanisms are analyzed using the housing demand index of demographic factors proposed by Mankiw and Well (Regional Science and Urban Economics, 1989, 19, 235-258). The distinctive feature of this paper is that we distinguish between the long-run and short-run effects using the notion of cointegration and an error correction model. We find a high price elasticity for long-run housing supply contrary to the U.S. results and conclude that the effect of the demographics on housing prices in Japan appears through a short-run adjustment process.