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The dynamic effect of macroeconomic factors on housing prices: Evidence from South Africa
This study examines the dynamic short- and long-run causal relationship between South African real house prices and macroeconomic fundamentals (gross domestic product, mortgage rate, exchange rate-USDZAR, affordability, household debt to disposable income, unemployment rate, share prices (JSE ALL sh...
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| Format: | Thesis |
| Language: | English |
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School of Economics
2022
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| Summary: | This study examines the dynamic short- and long-run causal relationship between South African real house prices and macroeconomic fundamentals (gross domestic product, mortgage rate, exchange rate-USDZAR, affordability, household debt to disposable income, unemployment rate, share prices (JSE ALL share index), foreign direct investment, and producer price index) over the 2000Q1-2019Q4 period. The study utilizes a vector error correction model (VECM) to estimate the short- and long-run causal relationships while accounting for endogeneity and reverse causality. The results suggest the existence of a significant short-run and long-run association between house prices and macroeconomic fundamental variables under review. More specifically, the empirical results presented reveal that the gross domestic product and producer price index had the most impact on house prices compared to all other variables. Furthermore, any disequilibrium of house prices from its fundamental determinants in the short-run always self-corrects in the long run. |
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