Impact of monetary policy on house prices: case of Pakistan
International Journal of Housing Markets and Analysis
ISSN: 1753-8270
Article publication date: 19 December 2019
Issue publication date: 19 December 2019
Abstract
Purpose
This study aims to explore the impact of monetary policy on house prices in Pakistan.
Design/methodology/approach
This study uses monthly time-series data of house prices, monetary policy, inflation and stock market index ranging from January 2011 to December 2016. All the series were checked for stationarity by using augmented Dickey–Fuller test, and lag length of 11 was decided on the basis of Schwert’z rule of thumb. Vector autoregressive (VAR) model was used because the series were not co-integrated.
Findings
The analysis revealed that monetary policy significantly affects house prices in Pakistan. Tight monetary policy results in lower house prices and vice versa. The relationship between monetary policy and house prices is unidirectional. The study also finds that higher inflation also leads to soaring house prices, but the variation in stock market index does not affect house prices.
Originality/value
To the best of authors’ knowledge, none of the existing studies explores the impact of monetary policy on house prices in Pakistan. The findings help investors and policy makers to understand the relationship between monetary policy and house prices to make better decisions.
Keywords
Citation
Umar, M., Akhtar, M., Shafiq, M. and Rao, Z.-U. (2019), "Impact of monetary policy on house prices: case of Pakistan", International Journal of Housing Markets and Analysis, Vol. 13 No. 3, pp. 503-512. https://doi.org/10.1108/IJHMA-12-2017-0106
Publisher
:Emerald Publishing Limited
Copyright © 2019, Emerald Publishing Limited