The effect of monetary policy on real house price growth in South Africa : a factor-augmented vector autoregression (FAVAR) approach
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Date
Authors
Gupta, Rangan
Jurgilas, Marius
Kabundi, Alain
Journal Title
Journal ISSN
Volume Title
Publisher
Elsevier
Abstract
This paper assesses the impact of monetary policy on real house price growth in South Africa using a factor-augmented vector autoregression (FAVAR), estimated using a large data set comprising of 246 quarterly series over the period 1980:01 to 2006:04. The results based on the impulse response functions indicate that, in general, house price inflation responds negatively to monetary policy shock, but the responses are heterogeneous across the middle-, luxury- and affordable-segments of the housing market. The luxury-, large-middle- and medium-middle-segments are found to respond much more than the small-middle- and the affordable-segments of the housing market. More importantly, we find no evidence of the home price puzzle, observed previously by other studies that analyzed house prices using small-scale models. We put this down to the benefit gained from using a large information set.
Description
Keywords
Factor augmented vector autoregression (FAVAR)
Sustainable Development Goals
Citation
Gupta, R, Jurgilas, M & Kabundi, A 2010, 'The effect of monetary policy on real house price growth in South Africa: a factor-augmented vector autoregression (FAVAR) approach', Economic Modelling, vol. 27, no. 1, pp. 315-323. [http://www.sciencedirect.com/science/journal/02649993]