Speculative Bubble on the Moroccan Real Estate Market: Identification and Cycles

Abstract

This chapter presents several approaches for identifying and dating the speculative bubble on real estate market. Using the real estate price index (IPAI), statistical and structural approaches were combined in order to detect the existence of a bubble on the Moroccan real estate market. The results obtained affirm that the Moroccan real estate market experienced a speculative bubble during the period 2006–2008 explained mainly by the boom of credit during the same period. The use of the Markov switching model affirmed that the speculative bubble on Morocco is cyclic and consequently corroborates the critic formulated by Evans (1991) concerning the traditional approaches for the detection of financial bubbles. Thus, the analysis of the series of the bubble, extracted using the Kalman filter, affirms the existence of two regimes, namely an explosive regime and a normal regime. The first regime describes the periods of explosion of the bubble and lasts for about 9 quarters, while the second, lasting for 14 quarters, describes the periods of return to the average cycle.

Citation

Zakaria, F. (2016), "Speculative Bubble on the Moroccan Real Estate Market: Identification and Cycles", The Spread of Financial Sophistication through Emerging Markets Worldwide (Research in Finance, Vol. 32), Emerald Group Publishing Limited, Leeds, pp. 269-309. https://doi.org/10.1108/S0196-382120160000032012