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Foreign capital inflow and housing prices in a developing country: an advanced econometric enquiry

Rafiq Ahmed (College Education Department, Government of Sindh, Karachi, Pakistan)
Syed Tehseen Jawaid (Office of Research, Innovation and Commercialization, Salim Habib University, Karachi, Pakistan)

International Journal of Housing Markets and Analysis

ISSN: 1753-8270

Article publication date: 25 January 2022

Issue publication date: 2 January 2023




The study is intended to find out the relationship between housing prices and the inflow of foreign capital in Pakistan. There is a shortage of housing units due to rising population and rural–urban migration since its inception; on the other hand, there is also a lack of housing finances. The urban sprawl has created the demand for housing units, but the supply of housing has not been increased up to the required level, the major reason is a deficiency of housing finances.


The analysis was carried out from 1973 to 2018, on an annual, quarterly and monthly basis; the structural changes are captured by the Zivot–Andrews unit root test. Gregory–Hansen test is used for cointegration, the combined cointegration also validates the results. In addition, the rolling window is used to capture timely changes between data sets. Finally, wavelet analysis is used to prove volatility.


The rising prices of housing in the country is alarming; Pakistan is a developing country, and it is facing many problems along with a housing shortage. The domestic sources of housing finances are inadequate, so foreign funds are welcomed. The rolling window regression proves that domestic factors along with the foreign capital inflow affect housing prices positively, and the wavelet analysis finds out that foreign direct investment is more volatile than workers’ remittances in financing the housing market.


This is a pioneering study to find out the impact of foreign capital inflows on the housing prices in the economy of Pakistan. The inadequacy of housing finances from domestic sources attracted foreign funds financing this sector. This study has used new techniques like rolling window and wavelet transformation, such techniques have not been used before.



Disclosure statement: No financial grant is taken.


Ahmed, R. and Jawaid, S.T. (2023), "Foreign capital inflow and housing prices in a developing country: an advanced econometric enquiry", International Journal of Housing Markets and Analysis, Vol. 16 No. 1, pp. 146-166.



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