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Assessing the effects of housing market shocks on output: the case of South Africa

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  • Bernard Njindan Iyke

Abstract

Purpose - This paper aims to assess the effects of housing market shocks on real output in South Africa, by focusing on the real private consumption channel. Design/methodology/approach - It measures housing market shocks as non-monetary housing shocks, uses a data set covering the period 1969Q4-2014Q4 and uses the agnostic identification procedure. Findings - The paper finds that 20 per cent of the variation in house prices is explained by these shocks. The paper also finds that the effects of housing demand shocks on real private consumption are short-lived and generate a transitory real output response. Overall, housing demand shocks have managed to explain nearly 13 per cent and 14 per cent of the variation in real private consumption and real output respectively, over 20-quarters ahead forecast revision. Research limitations/implications - This finding suggests that shocks emanating from the housing market in the country are essential and should be considered when making macroeconomic policy decisions. Originality/value - None of the existing studies, to our knowledge, have empirically assessed the effects of housing market shocks on real output directly. This paper attempts to contribute to the literature by assessing the direct impact of housing market shocks on the real output, using South Africa as a case study.

Suggested Citation

  • Bernard Njindan Iyke, 2018. "Assessing the effects of housing market shocks on output: the case of South Africa," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 35(2), pages 287-306, May.
    • Handle: RePEc:eme:sefpps:sef-09-2016-0237
    DOI: 10.1108/SEF-09-2016-0237
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    Citations

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    Cited by:

    1. Solikin M. Juhro & Paresh Kumar Narayan & Bernard Njindan Iyke, 2022. "Understanding monetary and fiscal policy rule interactions in Indonesia," Applied Economics, Taylor & Francis Journals, vol. 54(45), pages 5190-5208, September.
    2. Maryam Akbari Nasiri, 2020. "How Long Do Housing Cycles Last? A Duration Analysis For Emerging Economies," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 23(2), pages 179-200, July.

    More about this item

    Keywords

    South Africa; SVAR; Agnostic identification; Housing market shocks; Real output; C11; C32; E21; E31; R31;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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