Housing sector and economic policy uncertainty: A GMM panel VAR approach

Balcilar M., Roubaud D., Uzuner G., Wohar M. E.

International Review of Economics and Finance, vol.76, pp.114-126, 2021 (SSCI) identifier

  • Publication Type: Article / Article
  • Volume: 76
  • Publication Date: 2021
  • Doi Number: 10.1016/j.iref.2021.05.011
  • Journal Name: International Review of Economics and Finance
  • Journal Indexes: Social Sciences Citation Index (SSCI), Scopus, ABI/INFORM, Business Source Elite, Business Source Premier, EconLit
  • Page Numbers: pp.114-126
  • Keywords: Economic policy uncertainty, Housing price, Panel vector autoregression
  • Istanbul Gelisim University Affiliated: Yes

Abstract

© 2021This study is aimed at examining the dynamic relationship between real housing prices (RHP) return and economic policy uncertainty (EPU) using a panel vector autoregressive (PVAR) approach and annual data for a panel of panel of 16 countries over the period 2004–2018. The study includes economic growth, short-term interest rate, and population as additional covariates. Empirical results show that a positive shock to EPU leads to a decrease in housing prices with EPU showing only a weak response to housing price shocks. This implies that EPU has a robust predictive power for the housing market, implying the need for evaluating the associated risks. The panel Granger causality tests indicate strong and robust Granger causality from the EPU to housing prices, but not vice versa. The causal links also indicate that the effect of the EPU on RHP is direct rather than indirect through other variables. Based on these outcomes, policy recommendations are made for real estate agents, portfolio managers, and policy makers.