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

Author

Listed:
  • 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.

Suggested Citation

  • Kasai Ndahiriwe & Rangan Gupta, 2008. "Financial Liberalisation and the Effectiveness of Monetary Policy on House Prices in South Africa," Working Papers 200803, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:200803
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    Citations

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    Cited by:

    1. Rangan Gupta & Marius Jurgilas & Alain Kabundi & Stephen M. Miller, 2009. "Monetary Policy and Housing Sector Dynamics in a Large-Scale Bayesian Vector Autoregressive Model," Working Papers 200913, University of Pretoria, Department of Economics.
    2. Alain KABUNDI & Rangan GUPTA, 2009. "The Effect of Monetary Policy on House Price Inflation: A Factor Augmented Vector Autoregression (FAVAR) Approach," EcoMod2009 21500048, EcoMod.
    3. Rangan Gupta & Stephen M. Miller & Dylan van Wyk, 2010. "Financial Market Liberalization, Monetary Policy, and Housing Price Dynamics," Working papers 2010-06, University of Connecticut, Department of Economics.
    4. Goodness C. Aye & Mehmet Balcilar & Rangan Gupta & Charl Jooste & Stephen M. Miller & Zeynel A. Ozdemir, 2012. "Fiscal Policy Shocks and the Dynamics of Asset Prices: The South African Experience," Working Papers 201228, University of Pretoria, Department of Economics.

    More about this item

    Keywords

    Financial liberalisation; Impulse Response; Variance Decomposition; Structural Decomposition.;
    All these keywords.

    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; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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