Effects Of Exchange Rate Volatility On Real Estate Prices In Developing Economies, A Case Of Ghana

Jack, John Kwame Adu; Okyere, Frimpong; Amoah, Emmanuel Kwakye

doi:10.14738/assrj.611.7392

Cited by 7 publications

(6 citation statements)

References 11 publications

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“…Given that the appreciation of a currency makes domestic assets and commodities more expensive in the eyes of the international community, foreign investors are likely to reduce their demand for properties in South Africa. On another note, an appreciating exchange rate strengthens the value of local currency in relation to other currencies (Adu et al , 2019; Sumer and Özorhon, 2020). Finally, the study found that the inflation targeting framework, implemented in 2001, significantly reduced residential property prices.…”

Section: Results Of the Studymentioning

confidence: 99%

“…The study has further noted that the exchange rate appreciation significantly reduces house prices. Adu et al (2019) also investigated the impact of exchange rate volatility in Ghana and found that the appreciation exchange rate significantly influences residential properties. The findings of Adu et al (2019) were also in line with the study’s findings regarding the consumer price index.…”

Section: Discussion Of Resultsmentioning

confidence: 99%

“…Adu et al (2019) also investigated the impact of exchange rate volatility in Ghana and found that the appreciation exchange rate significantly influences residential properties. The findings of Adu et al (2019) were also in line with the study’s findings regarding the consumer price index. The study found a negative relationship between residential property prices and the consumer price index.…”

Section: Discussion Of Resultsmentioning

confidence: 99%

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Short-run dynamics and long-run effects of monetary policy on residential property prices in South Africa

Mwanyepedza,

Mishi

2023

IJHMA

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Purpose The study aims to estimate the short- and long-run effects of monetary policy on residential property prices in South Africa. Over the past decades, there has been a monetary policy shift, from targeting money supply and exchange rate to inflation. The shifts have affected residential property market dynamics. Design/methodology/approach The Johansen cointegration approach was used to estimate the effects of changes in monetary policy proxies on residential property prices using quarterly data from 1980 to 2022. Findings Mortgage finance and economic growth have a significant positive long-run effect on residential property prices. The consumer price index, the inflation targeting framework, interest rates and exchange rates have a significant negative long-run effect on residential property prices. The Granger causality test has depicted that exchange rate significantly influences residential property prices in the short run, and interest rates, inflation targeting framework, gross domestic product, money supply consumer price index and exchange rate can quickly return to equilibrium when they are in disequilibrium. Originality/value There are limited arguments whether the inflation targeting monetary policy framework in South Africa has prevented residential property market boom and bust scenarios. The study has found that the implementation of inflation targeting framework has successfully reduced booms in residential property prices in South Africa.

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Section: Results Of the Studymentioning

confidence: 99%

Section: Discussion Of Resultsmentioning

confidence: 99%

Section: Discussion Of Resultsmentioning

confidence: 99%

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Short-run dynamics and long-run effects of monetary policy on residential property prices in South Africa

Mwanyepedza,

Mishi

2023

IJHMA

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“…In Ghana, Adu et al [18] examined the effects of exchange rate volatility on real estate prices in developing economies. This study aimed to find out whether exchange rate volatility affects real estate domestic house prices in Ghana.…”

Section: Survey Of Relevant Literaturementioning

confidence: 99%

Factors Responsible for Movements in Real Effective Exchange Rate of Selected African Countries

Umoru,

Abugewa-Ejegi,

Effiong

2023

AJEBA

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The study examined the determinants of real effective exchange rate on selected African countries, namely, Nigeria, Libya, Angola, Egypt, Gabon, Ghana, and Chad over the sample period of 1980 to 2023. The vector error correction methodology was used in the study. The results suggest the following findings; In Nigeria, variations in the real effective exchange rate responded significantly and positively to Brent crude oil prices, domestic inflation rate, external debt burden, the volume of foreign exchange reserves, and prices of primary export. It also responded negatively to foreign investment flows. Whenever the real effective exchange rate deviated from its equilibrium, 74% of its disequilibrium was restored in Nigeria. In Libya, the response of real effective exchange rate was positive and significantly related to commodity prices of primary export but responded negatively and significantly to Brent crude oil prices, foreign investment inward stock, and foreign reserve holdings. In addition, 57% of the disequilibrium in the real effective exchange rate of the Libya currency was restored to the long-term value. In Angola, it was found that the variations in the real effective exchange rate had a positive and significant response with Brent crude oil prices and foreign investment inflows. It however responded negatively with a significance balance of payments and the volume of foreign reserves. About 60% of the disequilibrium in the real effective exchange rate was restored to the long-term value in Angola. In Egypt, the real effective exchange rate responded positively with significance to Brent crude oil prices, foreign investment inflows, and prices of primary export. Additionally, it responded negatively and significantly to the domestic inflation rate and external reserve holdings. Within the period of study in Egypt, 53% of the disequilibrium in the real effective exchange rate was restored to equilibrium. In Gabon, variations in the real effective exchange rate had a positive and significant response with Brent crude oil prices, real interest rate, external debt burden, and the volume of foreign exchange reserves. Also in Gabon, the real effective exchange rate responded negatively and significantly to the inflation rate and prices of primary export. Accordingly, 82% of the disequilibrium in the real effective exchange rate was restored to equilibrium. The Ghanaian real effective exchange rate relative to the dollar responded significantly and positively to Brent crude oil prices, domestic inflation rate, foreign debt burden, and foreign investment flows while it negatively responded to the Ghanaian balance of payment position. Each time the real effective exchange rate of the Ghanaian cedi deviated from its equilibrium value, 79% of its disequilibrium was restored. In Chad, variations in the real effective exchange rate responded significantly but negatively to the domestic inflation rate while it positively and significantly responded to Brent crude oil prices, external balance position, the volume of foreign reserve holdings, and foreign direct investment inflows. Also, whenever the real effective exchange rate deviated from its equilibrium value in Chad, 65% of its disequilibrium was restored in the long run. Based on these results, policymakers should focus on addressing structural constraints, commodity price fluctuations, and improve the business environment by anchoring policies of economic stability to boost competitiveness in trade and industry. There is also the need for policymakers to consider country-specific factors when formulating exchange rates.

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“…There are several studies that have tried to examine the relationship between exchange rates and their fluctuations on real estate prices. For instance, Adu Jack et al (2019) using ARDL framework show that volatility in the exchange rate does not predict changes in real estate prices in Ghana. On the contrary, Benson et al (1999) realized that there is a positive and significant relationship between the exchange rate and housing prices in the Canadian economy, so that, a 10% rise in the exchange rate leads to a 7.7% rise in Bellingham home prices.…”

Section: Literature Reviewmentioning

confidence: 99%

(A)symmetric interaction between house prices, stock market and exchange rates using linear and nonlinear approach: the case of Iran

Mahmoudinia

Mostolizadeh

2022

IJHMA

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Purpose The purpose of this study was to investigate the dynamic interactive link between housing prices, stock market price and effective exchange rate in the Iranian economy for a monthly period from April, 2004, to March, 2019. In addition, for a more accurate analysis, three control and determinates variables including real interest rate, real GDP and FDI have been added to the base model. Design/methodology/approach For this purpose, we will consider this issue by developing the study of Lean & Smyth (2014), Ali & Zaman (2017) and Coskun et al (2017) in the framework of ADRL and NARDL models. Also, this study analyzed the asymmetric/non-linear impact of stock market indexes and effective exchange rate on Iran’s housing inflation. Asymmetries imply to both positive and negative changes in the variables. Findings The results obtained from the ADRL and NARDL models suggest that the existence of cointegration relationship between housing market price and its determinants. From linear model, we found that the exchange rate and stock market price have a positive effect on the real estate inflation in the short run; this relationship is also confirmed in the long run. Other empirical results indicate that the GDP stimulates housing price in both long and short run cases, while FDI and real interest rate have an opposite effect. In addition, the results provided by the asymmetric model lead to the rejection of the null hypothesis of no co-integration between the variables. In addition, we found that the effect of stock price in the short and long term are asymmetric and there also is an asymmetric long-run effect of real exchange rate on the real estate price. Originality/value Finally, to analyze the sensitivity, we entered two explanatory variables of inflation and money supply to the baseline equation. The finding represented that in both linear and nonlinear framework, a positive correlation between these two variables with housing prices have been proved.

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Effects Of Exchange Rate Volatility On Real Estate Prices In Developing Economies, A Case Of Ghana

Cited by 7 publications

References 11 publications

Short-run dynamics and long-run effects of monetary policy on residential property prices in South Africa

Short-run dynamics and long-run effects of monetary policy on residential property prices in South Africa

Factors Responsible for Movements in Real Effective Exchange Rate of Selected African Countries

(A)symmetric interaction between house prices, stock market and exchange rates using linear and nonlinear approach: the case of Iran

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