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

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  • Kasai Ndahiriwe

    ()
    (Department of Economics, University of Pretoria)

  • Rangan Gupta

    ()
    (Department of Economics, University of Pretoria)

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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Bibliographic 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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Keywords: Financial liberalisation; Impulse Response; Variance Decomposition; Structural Decomposition.;

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Cited by:
  1. Beatrice D. Simo-Kengne & Rangan Gupta & Goodness C. Aye, 2013. "Macro Shocks And House Prices In South Africa," Working Papers, University of Pretoria, Department of Economics 201302, University of Pretoria, Department of Economics.
  2. Rangan Gupta & Marius Jurgilas & Alan Kabundi & Stephen M. Miller, 2009. "Monetary Policy and Housing Sector Dynamics in a Large-Scale Bayesian Vector Autoregressive Mode," Working Papers, University of Nevada, Las Vegas , Department of Economics 0919, University of Nevada, Las Vegas , Department of Economics.
  3. Goodness C. Aye & Mehmet Balcilar & Rangan Gupta & Charl Jooste & Stephen M. Miller & Zeynel Abidin Ozdemir, 2012. "Fiscal Policy Shocks and the Dynamics of Asset Prices: The South African Experience," Working papers, University of Connecticut, Department of Economics 2012-27, University of Connecticut, Department of Economics.
  4. Simo-Kengne, Beatrice D. & Balcilar, Mehmet & Gupta, Rangan & Reid, Monique & Aye, Goodness C., 2013. "Is the relationship between monetary policy and house prices asymmetric across bull and bear markets in South Africa? Evidence from a Markov-switching vector autoregressive model," Economic Modelling, Elsevier, Elsevier, vol. 32(C), pages 161-171.
  5. Beatrice D. Simo - Kengne & Mehmet Balcilar & Rangan Gupta & Monique Reid & Goodness C. Aye, 2012. "Is the relationship between monetary policy and house prices asymmetric in South Africa? Evidence from a Markov-Switching Vector Autoregressive mode," Working Papers 14/2012, Stellenbosch University, Department of Economics.
  6. Rangan Gupta & Marius Jurgilas & Stephen M. Miller & Dylan van Wyk, 2010. "Financial Market Liberalization, Monetary Policy, and Housing Price Dynamics," Working Papers, University of Pretoria, Department of Economics 201009, University of Pretoria, Department of Economics.
  7. Alexander Zimper, 2013. "The minimal confidence levels of Basel capital regulation," Working Papers, University of Pretoria, Department of Economics 201305, University of Pretoria, Department of Economics.
  8. Rangan Gupta & Charl Jooste & Kanyane Matlou, 2013. "A Time-Varying Approach to Analysing Fiscal Policy and Asset Prices in South Africa," Working Papers, University of Pretoria, Department of Economics 201303, University of Pretoria, Department of Economics.

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