scholarly journals What Drives Housing Prices Down? Evidence from an International Panel

2010 ◽  
Vol 230 (1) ◽  
Author(s):  
Konstantin A. Kholodilin ◽  
Jan-Oliver Menz ◽  
Boriss Siliverstovs
Keyword(s):  
Interest Rates ◽  
Growth Rates ◽  
Housing Prices ◽  
Housing Wealth ◽  
Average Growth ◽  
Economic Growth Rate ◽  
International Panel ◽  
Differential Development ◽  
Long Run

SummaryIn this study, we suggest an explanation for the low growth rates of real housing prices in Canada and Germany in comparison to other OECD countries over the period 1975-2005. We show that the long-run development of housing markets is determined by real disposable per-capita income, the real long-term interest rate, population growth, and urbanization. The differential development of real housing prices in Canada and Germany is attributed to the fundamentals in these two countries. Canada and Germany are characterized by relatively low average growth rates of real disposable income and relatively high interest rates, resulting in depressed housing prices over a long period of time. Institutional structure accentuates these tendencies. Given the importance of housing wealth for private consumption, our paper aims at drawing the attention of policymakers to the necessity of preventing not only overheating but also overcooling of the housing market that entails lower economic growth rate.

Dynamic implications of GDP, interest rates, taxes, income, foreign direct investments, housing prices on property NPLs

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Kuen-Wei Tham ◽  
Rosli Said ◽  
Yasmin Mohd Adnan
Keyword(s):  
Interest Rates ◽  
Global Financial Crisis ◽  
Housing Prices ◽  
Economic Environment ◽  
Macroeconomic Factors ◽  
Content Type ◽  
Macroeconomic Variables ◽  
Long Run ◽  
First Time

Purpose The study on how macroeconomic factors affect non-performing loans (NPLs) have not been focussed on property loans, which had been amongst the largest contributor of NPLs in many countries. At the same time, whilst there are many studies that focusses on NPLs during the recession and financial crises, not many studies focus on how macroeconomic factors affect property NPLs in a recovering economic environment. The purpose of this study seeks to fill the gap by analysing the relationships between gross domestic product (GDP), interest rates, income, foreign direct investments (FDI), housing prices and taxes on property NPLs with Malaysia as a case study in which NPLs rose for the first time after declining for almost a decade since the 2008–2009 global financial crisis. This study aims to understand the dynamics and direction of causation in relationships. Design/methodology/approach The author uses the auto regressive distribution lag analysis between the independent variables of GDP, interest rates, housing prices, service taxes, percapita income and FDI affecting the dependent variable of property NPLs from 2009 to 2017, during a unique period of recovering economic environment where NPLs rose for the first time in almost a decade of decline. Findings This study found that interest rates, housing prices, income, GDP and service taxes were found to possess long cause effects and long run elasticity with NPLs. At the same time, interest rates were found to implicate property NPLs significantly in longer periods, followed by GDP, housing prices, service taxes and income. FDIs were found to be insignificantly negative in implicating property NPLs in the long run. Research limitations/implications This paper allows policymakers to understand the dynamic implications of crucial macroeconomic factors in affecting NPLs so that appropriate strategic monetary policies could be formulated towards addressing them. More focus shall be given to addressing the long term implications of these factors on NPLs. Practical implications Appropriate strategic monetary policy making can be channelled towards addressing these factors via understanding the short and long term implications of macroeconomic variables on property NPLs. Policymakers can take note of the long cause effects and long run elasticity of average interest rates, housing prices, income levels, GDP and service taxes with property NPLs so that appropriate long term policies can be addressed to control the rise of property NPLs in the country. At the same time, priority should be given towards strengthening of the GDP of the country due to its strongest impact in long term effects with reduction of NPLs in the country. Social implications The insights from the present study suggest policymakers interested in bringing stability in the real estate finance system need to account for the various macroeconomic variables found in this study. Originality/value The paper is novel on at least two dimensions. First, this study involves focussing on a unique period of recovering economic environment where NPLs rose for the first time after a decade of decline since recovering from the 2008–2009 global financial crisis. At the same time, this study focusses on property NPLs, which is unique in nature compared to general NPLs. This study had enabled policymakers to better understand the dynamic implications of several macroeconomic variables affecting property NPLs and assist them in strategic monetary policy making.

Consumption, personal income, financial wealth, housing wealth, and long-term interest rates: a panel cointegration approach for 50 US states

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Dimitra Kontana ◽  
Stilianos Fountas
Keyword(s):  
Interest Rates ◽  
Panel Cointegration ◽  
Cointegration Analysis ◽  
Housing Wealth ◽  
Cross Sectional ◽  
Us States ◽  
Financial Wealth ◽  
Long Run ◽  
Short Run

Abstract This study investigates the long-run and short-run relationship between consumption, income, financial and housing wealth, and a long-term interest rate for the 50 US states. Using an updated set of quarterly data from 1975 to 2018, we perform panel cointegration analysis allowing for cross-sectional dependence. We obtain the following results. First, there is strong evidence for cointegration among consumption and its determinants. Second, estimates of the housing wealth and financial wealth elasticity of consumption range from 0.072 to 0.115 and 0.044 to 0.080, respectively. Finally, Granger causality tests show that there is a bidirectional short-term causality between per capita consumption, income, and financial wealth in the short run and between all the variables in the long run.

scholarly journals Modeling The Relationships Between Export, Import, Inflation, Interest Rate, and Rupiah Exchange

2020 ◽  
Vol 3 (3) ◽  
pp. 247-262
Author(s):  
Nina Valentika ◽  
Vivi Iswanti Nursyirwan ◽  
Ilmadi Ilmadi
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Granger Causality ◽  
Granger Causality Test ◽  
Short Term ◽  
Variable Model ◽  
Causality Test ◽  
Significance Level ◽  
Long Run

This research was a modification of research by Catalbas (2016) and Pratikto (2012). The model that can separate long-term and short-term components are the Vector Error Correction Model (VECM). This study aimed to model export, import, inflation, interest rates, and the rupiah exchange rate using VECM and to test the causality between variables using the Granger Causality test. The inter-variable model obtained in this study was VECM with lag 2 using a deterministic trend with the assumption of none intercept no trend and two cointegrations. In export and import, there was an adjustment mechanism from the short-term to the long-term. This research model was appropriate to forecast the export and import where VECM with export and import as the target variables, the cointegration equation (long-run model) for  cointegration equation (long-run model) for Based on the Granger Causality test, it was found that there was a one-way relationship between exchange rates and inflation, export and interest rates, export and import, inflation and export, and import and the interest rate at the significance level of 5%.

scholarly journals Analisis Faktor-Faktor yang Mempengaruhi Nilai Tukar Rupiah Periode 1999Q1-2019Q2

2020 ◽  
Vol 11 (2) ◽  
pp. 197-209
Author(s):  
Erric Wijaya
Keyword(s):  
Exchange Rate ◽  
Interest Rate ◽  
Interest Rates ◽  
Inflation Rate ◽  
Oil Prices ◽  
Short Term ◽  
Long Run ◽  
The Exchange Rate ◽  
The Interest Rate

The exchange rate plays an important role in influencing the level of Indonesia's international trade towards trading partner countries. This study discusses the factors that influence the exchange rate of the rupiah against dollar both in the short and long term. The variables that are suspected to influence changes in exchange rates are the inflation rate, the interest rate (SBI), world oil prices, the value of exports, and the value of imports. This research was conducted during 1999 quarter 1 to 2019 quarter 2. The results showed that there was a long-term and short-term relationship between inflation rates, interest rates, world oil prices, exports and imports to the exchange rate. In the short term, the interest rate and world oil prices have a significant effect on the exchange rate. In the long run, the inflation rate, world oil prices and imports have a significant effect on the exchange rate.

scholarly journals Long-Run Retail Interest Rate Pass-Through In The Euro Area: The Effect Of The Financial Crisis

2015 ◽  
Vol 31 (5) ◽  
pp. 147
Author(s):  
Manel Mansour ◽  
David Heller ◽  
Moez Labidi ◽  
Amine Lahiani
Keyword(s):  
Financial Crisis ◽  
Interest Rates ◽  
Euro Area ◽  
Time Horizon ◽  
Monthly Basis ◽  
Adjustment Mechanism ◽  
Long Run ◽  
Banking Market ◽  
Pass Through

This paper analyzes the long-run pass-through of money market rates to retail interest rates (both lending and deposit rates). We rely on fully harmonized data from MIR statistics (MFI Interest Rates) for 8 countries of the euro area. From January 2003 to February 2014, interest rates are observed on a monthly basis on new contracts related to the three largest segments of the banking market (consumer, mortgage, and Non-Financial Corporations - NFCs). The long-term pass-through is measured following the Phillips and Loretan (PL) approach which is proved to be more effective than the Engle-Granger OLS (EG-OLS) approach. We also investigate the effect of the financial crisis on the degree of the long-run pass-through. Results suggest that the financial crisis deepens the heterogeneity of the speed and degree of the bank rates adjustment mechanism. Moreover, within the same country, the characteristics of long-run pass-through differ both among banking products and time horizon.

Participation and productivity will drive long run GDP

2018 ◽  
Keyword(s):  
Interest Rates ◽  
Developed Countries ◽  
Living Standards ◽  
Lower Growth ◽  
Secular Stagnation ◽  
Content Type ◽  
Long Run ◽  
Advanced Economies ◽  
Labour Participation

Subject OECD long-run growth projections are predicated on the 'secular stagnation' argument. Significance The OECD has sharply reduced its outlook for long-term rich-world growth with interest rates rising commensurately slower. Moreover, the International Labour Organization projects even weaker workforce growth than the OECD in the advanced economies in the 2020s. Impacts Trade among developing countries accounts for near 30% of all trade (from 10% in 1995) and will soon top trade among developed countries. Efforts to raise labour participation, quality and productivity are key to raising living standards. Lower growth makes it harder to stabilise debt-to-GDP ratios, just as ageing rich-world populations raise pension and health costs.

Housing and the Wider Economy in the Short and Long Run

1992 ◽  
Vol 139 ◽  
pp. 64-78 ◽  
Author(s):  
David Miles
Keyword(s):  
House Prices ◽  
Practical Importance ◽  
Relative Price ◽  
Housing Wealth ◽  
Housing Investment ◽  
Long Run ◽  
Financial Liberalisation ◽  
The Uk ◽  
The Impact

Over the course of the twentieth century housing wealth in the UK has risen dramatically; recently it has become easier for households to borrow against that wealth. The process by which real housing wealth has growth—through long-term increases in the relative price of homes and substantial real investment in the stock of dwellings—has implications for the impact of financial liberalisation upon saving future house prices and bequests of housing. This article takes a long-term perspective on housing in the UK in order to answer questions of great practical importance. The interaction between savings, population changes, bequests of properly, housing investment and house prices is analysed and the forces driving these variables into the next century are assessed.

scholarly journals Money Demand in Korea: A Cointegration Analysis, 1973-2014

2016 ◽  
Vol 6 (1) ◽  
pp. 96 ◽  
Author(s):  
Hyungsun Chloe Cho ◽  
Miguel D. Ramirez
Keyword(s):  
Interest Rates ◽  
Error Correction ◽  
Money Demand ◽  
Error Correction Model ◽  
Cointegration Analysis ◽  
Impulse Response Functions ◽  
Stable Model ◽  
Correction Model ◽  
Long Run

<p class="ber">This paper estimates the demand for real money in Korea over the 1973Q3 to 2014Q4 period via unit root and cointegration methods. Utilizing the Johansen cointegration methodology and the Pantula principle, it establishes that a long-term relationship exists among the included variables. The paper also estimates an error correction model (ECM) as well as a vector error correction model (VECM), extending previous analyses by performing forecasts and testing for Granger causality among the variables. It finds that the broader definition of money, M2, serves as a relatively better measure of the money aggregate than M1 when evaluating the stability of the real demand for money. The long-term interest (LR) rate also seems to provide better results than the short-term rate (SR), which is consistent with economic theory given that it refers to a long-run equilibrium relationship. Both the ECM and VECM estimates showed the expected (and significant) signs on the coefficients; LM2 (LM1) and LGDP were positively related and LM2 (LM1) and LR (SR) were negatively related. Granger block causality tests and impulse response functions together seem to suggest that the traditional money demand function which places M as its ‘dependent’ variable, while including income and interest rates as its regressors, was a robust and stable model in the case of Korea.</p>

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