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Abstract
This study estimates an econometric model to explain changes in Norwegian house prices. This is useful as it expands the understanding of how and why Norwegian house prices move as they do. The study utilizes Statistics Norway’s house prices Index as the dependent variable. The study regards an array of potential determinants of house prices and employs statistical tests to determine the variables’ quality. Finally, a vector autoregressive model is estimated. The final VAR model specification is based on a selection procedure made up of SBC, pseudo out-of-sample RMSE, and impulse response functions. The best model specification consists of the variables house price, interest rate, unemployment rate, and two different measures of housing starts. This study uses 60 quarterly observations covering 15 years of data.