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Impact of monetary policy on house prices: case of Pakistan

Author

Listed:
  • Muhammad Umar
  • Moin Akhtar
  • Muhammad Shafiq
  • Zia-Ur-Rehman Rao

Abstract

Purpose - This study aims to explore the impact of monetary policy on house prices in Pakistan. Design/methodology/approach - This study uses monthly time-series data of house prices, monetary policy, inflation and stock market index ranging from January 2011 to December 2016. All the series were checked for stationarity by using augmented Dickey–Fuller test, and lag length of 11 was decided on the basis of Schwert’z rule of thumb. Vector autoregressive (VAR) model was used because the series were not co-integrated. Findings - The analysis revealed that monetary policy significantly affects house prices in Pakistan. Tight monetary policy results in lower house prices and vice versa. The relationship between monetary policy and house prices is unidirectional. The study also finds that higher inflation also leads to soaring house prices, but the variation in stock market index does not affect house prices. Originality/value - To the best of authors’ knowledge, none of the existing studies explores the impact of monetary policy on house prices in Pakistan. The findings help investors and policy makers to understand the relationship between monetary policy and house prices to make better decisions.

Suggested Citation

  • Muhammad Umar & Moin Akhtar & Muhammad Shafiq & Zia-Ur-Rehman Rao, 2019. "Impact of monetary policy on house prices: case of Pakistan," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 13(3), pages 503-512, December.
    • Handle: RePEc:eme:ijhmap:ijhma-12-2017-0106
    DOI: 10.1108/IJHMA-12-2017-0106
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    Citations

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    Cited by:

    1. Olumide O. Olaoye & O. J. Omokanmi & Mosab I. Tabash & S. O. Olofinlade & M. O. Ojelade, 2024. "Soaring inflation in sub-Saharan Africa: A fiscal root?," Quality & Quantity: International Journal of Methodology, Springer, vol. 58(1), pages 987-1009, February.
    2. Benjamin Kwakye & Chan Tze Haw, 2020. "Interplay of the Macroeconomy and Real Estate: Systematic Review of Literature," International Journal of Economics and Financial Issues, Econjournals, vol. 10(5), pages 262-271.
    3. Rafiq Ahmed & Syed Tehseen Jawaid & Samina Khalil, 2021. "Bubble Detection in Housing Market: Evidence From a Developing Country," SAGE Open, , vol. 11(2), pages 21582440211, April.
    4. Imran Yousaf & Shoaib Ali, 2020. "Integration between real estate and stock markets: new evidence from Pakistan," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 13(5), pages 887-900, April.
    5. Zulfiqar Ali Imran & Muhammad Ahad, 2022. "Safe-haven investments against stock returns in Pakistan: a role of real estate, gold, oil and US dollar," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 16(1), pages 167-189, February.
    6. Imran, Zulfiqar Ali & Ahad, Muhammad, 2021. "Safe Haven or Hedge: Diversification Abilities of Asset Classes in Pakistan," MPRA Paper 107613, University Library of Munich, Germany, revised 02 May 2021.

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