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Financial Liberalisation and the Effectiveness of Monetary Policy on House Prices in South Africa

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Author Info
Kasai Ndahiriwe () (Department of Economics, University of Pretoria)
Rangan Gupta () (Department of Economics, University of Pretoria)

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Abstract

This paper investigates the effectiveness of monetary policy on house prices in South Africa, before and after financial liberalisation, with financial liberalisation being identified with the recommendations of the De Kock Commission (1985). Using both impulse response and variance decomposition analysis performed on SVARs, we find that, irrespective of house sizes, during the period of financial liberalisation, interest rate shocks had relatively stronger effects on house price inflation. However, given that the size of these effects were nearly negligible, the result seems to indicate that house prices are exogenous, and, at least, are not driven by monetary policy shocks.

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Publisher Info
Paper provided by University of Pretoria, Department of Economics in its series Working Papers with number 200803.

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Length: 26 pages
Date of creation: Mar 2008
Date of revision:
Handle: RePEc:pre:wpaper:200803

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Related research
Keywords: Financial liberalisation; Impulse Response; Variance Decomposition; Structural Decomposition.;

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Find related papers by JEL classification:
C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Stan du Plessis & Ben Smit & Federico Sturzenegger, 2007. "Identifying aggregate supply and demand shocks in South Africa," Working Papers 11/2007, Stellenbosch University, Department of Economics. [Downloadable!]
  2. Rangan Gupta & Sonali Das, 2008. "Spatial Bayesian Methods of Forecasting House Prices in Six Metropolitan Areas of South Africa," Working Papers 200813, University of Pretoria, Department of Economics.
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  3. Isaksson, Anders, 2001. "Financial liberalisation and price stability in Kenya," Journal of Policy Modeling, Elsevier, vol. 23(5), pages 503-510, July. [Downloadable!] (restricted)
  4. De Santis, Giorgio & imrohoroglu, Selahattin, 1997. "Stock returns and volatility in emerging financial markets," Journal of International Money and Finance, Elsevier, vol. 16(4), pages 561-579, August. [Downloadable!] (restricted)
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  5. Topel, Robert H & Rosen, Sherwin, 1988. "Housing Investment in the United States," Journal of Political Economy, University of Chicago Press, vol. 96(4), pages 718-40, August. [Downloadable!] (restricted)
  6. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," NBER Working Papers 5146, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Matteo Iacoviello & Raoul Minetti, 2002. "The Credit Channel of Monetary Policy: Evidence from the Housing Market," Boston College Working Papers in Economics 541, Boston College Department of Economics, revised 29 Aug 2003. [Downloadable!]
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  8. Dahlquist, Magnus & Pinkowitz, Lee & Stulz, Ren? M. & Williamson, Rohan, 2003. "Corporate Governance and the Home Bias," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(01), pages 87-110, March. [Downloadable!]
  9. Kang, Jun-Koo & Stulz, Rene M., 1997. "Why is there a home bias? An analysis of foreign portfolio equity ownership in Japan," Journal of Financial Economics, Elsevier, vol. 46(1), pages 3-28, October. [Downloadable!] (restricted)
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