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Real Estate Market and Macroeconomic Factors in Kuwait: An ARDL Approach

Author

Listed:
  • Abul, Sadeq

    (Independent Economic Advisor)

  • Al-Kandari, Ahmad M.

    (Department of Insurance and Banking, College of Business Studies, State of Kuwait)

Abstract

This study examines the short-run and dynamic long-run relationship between the real estate market and four selected macroeconomic variables in Kuwait. These macroeconomic variables include: Money Supply (M2), the Kuwait Main Market Index of Kuwait Stock Exchange (KSEI), the One-month Interest Rate on deposits (INTR) and oil prices (OIL). By using the ARDL model and ECM, this study finds evidence that M2 has a strong correlation with the real estate market in Kuwait in both runs, while oil prices have negative influences in the short-run but robust positive impacts in the long-run relationship. No significant relationship was found between real estate market and the Kuwaiti stock market index in the short- or long-run. However, in the long-run, the interest rate has a negative relationship with the real estate market. The results obtained from this study show that, if the system moves away from equilibrium, this will be corrected in the long run by 98% from departure for each period. There is evidence of long-run causality between the real estate market in Kuwait and the money supply, oil prices and the interest rate. Il mercato immobiliare e i fattori macroeconomici in Kuwait: un approccio ARDL Questo studio esamina la relazione di breve periodo e la relazione dinamica di lungo periodo tra il mercato immobiliare in Kuwait e quattro variabili macroeconomiche selezionate, ovvero: la domanda di moneta (M2), il Kuwait Main Market Index of Kuwait Stock Exchange (KSEI), il tasso di interesse sui depositi ad un mese (INTR) ed il prezzo del petrolio (OIL). Con l’utilizzo dei modelli ARDL ed ECM, i risultati della ricerca evidenziano che la domanda di moneta (M2) è in forte correlazione con il mercato immobiliare in Kuwait, in entrambe le direzioni. Il prezzo del petrolio invece influisce negativamente nel breve periodo ed in maniera fortemente positiva nel lungo periodo. Non si riscontra alcuna relazione significativa tra il mercato immobiliare ed il mercato azionario in Kuwait, né nel breve né nel lungo periodo, anche se in quest’ultimo caso il tasso di interesse ha un’influenza negativa sul mercato immobiliare. Questi risultati dimostrano che se il sistema si allontana dalla condizione di equilibrio, nel lungo periodo nel 98% dei casi la correzione avverrà all’inizio di ogni periodo. Vi è evidenza di causalità di lungo periodo tra il mercato immobiliare in Kuwait e la domanda di moneta, il prezzo del petrolio ed il tasso di interesse.

Suggested Citation

  • Abul, Sadeq & Al-Kandari, Ahmad M., 2020. "Real Estate Market and Macroeconomic Factors in Kuwait: An ARDL Approach," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(3), pages 405-434.
    • Handle: RePEc:ris:ecoint:0878
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    More about this item

    Keywords

    Real-Estate; ARDL; ECM; OIL; M2; Kuwait;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D19 - Microeconomics - - Household Behavior - - - Other
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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