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Macroeconomic Variables’ Impact on Rental Rate in the United Kingdom Islamic Home Financing Using Bound Cointegration Test

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  • Jamilu SALIHU

    (Kano State Polytechnic Department of Banking and Finance)

Abstract

Rental rate has been suggested as a better alternative to replace the interest rate in Islamic home financing. However, the suggested alternative has to be free from the influence of any form of interest rate. This paper examines the long-run influence of macroeconomic variables on the rental rate in the United Kingdom housing market. The aim is to investigate whether the rental rate is free from the influence of both long-term and short-term interest rates in order to substitute the interest rate in Islamic home financing. The study employs Autoregressive distributed lags (ARDL) model to empirically estimate a long-run relationship between the rental rate and some selected macroeconomic variables. Using the United Kingdom housing market data from the first quarter of 1990 to the last quarter of 2016. The results show that rental rate is free from the influence of both short-term and long-term interest rate. Hence it could be recommended as an alternative to interest for Islamic home financing. The results further show that GDP, inflation rate, and share price positively influence rental rate.

Suggested Citation

  • Jamilu SALIHU, 2024. "Macroeconomic Variables’ Impact on Rental Rate in the United Kingdom Islamic Home Financing Using Bound Cointegration Test," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 11(10), pages 635-647, October.
    • Handle: RePEc:bjc:journl:v:11:y:2024:i:10:p:635-647
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