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Transmission Channels Linking Real Estate Shocks with Macroeconomic Performance: Evidence from Malaysia

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Abstract

This paper examines the transmission channels through which property markets propagate shocks to the real economy. Using a four-equation model which portrays the theoretical inter-linkages between real estate value and other components of the economy, our findings suggest that in the short run, negative real estate shocks affect GDP by dampening construction, bank lending activities and to a certain extent, consumption. The impact of shocks on investment is harder to decipher given the complicated dynamics arising from an almost instantaneous adjustment process towards equilibrium each time the system is perturbed. In the long run, there is no evidence of positive wealth effects on consumption while sustained depressions in property markets could be harmful to future economic growth.

Suggested Citation

  • Hon-Chung Hui, 2008. "Transmission Channels Linking Real Estate Shocks with Macroeconomic Performance: Evidence from Malaysia," NUBS Malaysia Campus Research Paper Series 2008-09, Nottingham University Business School Malaysia Campus.
    • Handle: RePEc:nom:nubsmc:2008-09
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    Cited by:

    1. Geok Peng Yeap & Hooi Hooi Lean, 2020. "Supply elasticity of new housing supply in Malaysia: an analysis across housing sub-markets," Economics Bulletin, AccessEcon, vol. 40(1), pages 807-820.

    More about this item

    Keywords

    Real estate shocks; Transmission channels; Macroeconomic performance;
    All these keywords.

    JEL classification:

    • 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
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)

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