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Housing prices and real effective exchange rates in 18 OECD countries: A bootstrap multivariate panel Granger causality

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  • Bahmani-Oskooee, Mohsen
  • Wu, Tsung-Pao

Abstract

Through its inflationary effects, exchange rate changes could affect house prices. On the other hand, rising house prices could have a wealth effect on consumption and imports, inducing an increase in demand for foreign exchange. We apply a bootstrap multivariate panel Granger causality test to examine the causal relationship between house prices and real effective exchange rates across 18 OECD countries. After accounting for both dependency and heterogeneity across these countries, we find support for house prices causing exchange rate changes in half of the countries in our sample and exchange rates causing house price changes in another half.

Suggested Citation

  • Bahmani-Oskooee, Mohsen & Wu, Tsung-Pao, 2018. "Housing prices and real effective exchange rates in 18 OECD countries: A bootstrap multivariate panel Granger causality," Economic Analysis and Policy, Elsevier, vol. 60(C), pages 119-126.
    • Handle: RePEc:eee:ecanpo:v:60:y:2018:i:c:p:119-126
    DOI: 10.1016/j.eap.2018.09.005
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    More about this item

    Keywords

    Bootstrap multivariate panel Granger causality test; Dependency and heterogeneity; House price; OECD countries; Real effective exchange rate;
    All these keywords.

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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