Determinants of housing inflation in Turkey: a conditional frequency domain causality

Abstract

Purpose This study aims to investigate whether changes in consumer interest rate, exchange rate and housing supply have permanent effects on housing inflation in Turkey. Design/methodology/approach For this purpose, data from 2010M01 to 2020M06 and changes in consumer interest rate, exchange rate, housing supply and housing inflation were used. Relationships between variables are analyzed first by the Granger causality tests and then the conditional frequency domain causality tests. The conditional frequency domain causality test specifically reveals the permanent causality between variables, whether there is a permanent effect. Findings According to the Granger causality test results, there are causality relationships from changes in the consumer interest rate and exchange rate to housing inflation. However, there is no causality relationship between housing supply and housing inflation. According to the conditional frequency domain causality test results, there is causality for the permanent and mid-term from changes in the consumer interest rate to housing inflation and causality for the mid-term and temporary from changes in the exchange rate to housing inflation. Additionally, it was found that there are causality relationships between changes in the consumer interest rate and changes in the exchange rate. Research limitations/implications The first limit of the study is that only 2010M01-2020M06 months can be considered. Because the date that variables started common is 2010M01. Besides, there is a limit in the study in variables used. Many variables, both micro and macro, can be added to affect housing inflation. Originality/value Housing inflation is a remarkable issue in Turkey. There is an increase in the number of studies on the subject in recent years. For this reason, the study is trying to contribute by approaching the subject from a different angle. The most important contribution of the study is that it has not been investigated whether the determinants of housing inflation have permanent or temporary effects, which were not done in previous studies. In addition, the method used reveals how many months the effects of changes in exchange rates, consumer interest rates and housing supply on housing inflation last. Based on the findings obtained from the methods, important economic and political implications have been put forward in depth.

House price dynamics and relations with the macroeconomic indicators in Turkey

“…When the results obtained are compared with the literature, Akcay et al (2021), Kırca and Canbay (2022), Atasoy and Tanrıvermis (2021), Colak (2021), Yıldırım et al (2021), Gebes o glu (2019), Nneji et al (2013), Goodhart andHofmann (2008), McQuinn andO'Reilly (2008) and Zhu (2006) have obtained similar results in terms of determining the short-and long-term relationships of housing prices with macrovariables. Çetin (2021) determined the relationship between housing prices, inflation and industrial production index as negative and the relationship between interest rates as positive.…”

The asymmetric effects of real variables on real housing prices: a nonlinear ARDL analysis for Turkey

“…According to these results, it is seen that increases in the housing price index negatively affect consumer confidence in the long run, and decreases in it also have negative effects on consumer confidence. It has been concluded that the short-term coefficients between the housing price index and the consumer confidence index are positive and significant Kırca and Canbay (2021) Because NARDL analysis requires the variables used in the analysis to be stationary at level or first differences, unit root analysis is required. Therefore, Lee and Strazizich (2003) unit root test allowing two structural breaks was used to determine the stationarity level of the variables used.…”

Housing and Setting Constraints: The Portuguese Evidence

“…According to the conditional frequency domain causality test results, there is causality for the permanent and mid-term from changes in the consumer interest rate to housing inflation and causality for the mid-term and temporary from changes in the exchange rate to housing inflation. Additionally, it was found that there are causality relationships between changes in the consumer interest rate and changes in the exchange rate [28].…”