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Are house prices in South Africa really nonstationary? Evidence from SPSM-based panel KSS test with a Fourier function

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  • Tsangyao Chang
  • Tsung-Pao Wu
  • Rangan Gupta

Abstract

This study applies the sequential panel selection method (SPSM) to investigate the time-series properties of provincial house prices for entire, large, medium and small middle-segments of South Africa. Quarterly time-series data were collected from nine provinces in South Africa for different house-size categories over the period of 1978.Q1 to 2012.Q4. Whereas other panel-based unit-root tests are joint tests of a unit root for all members of a panel and are incapable of determining the mix of integrated of order zero ( I(0) ) series and integrated of order one ( I(1) ) series in a panel setting, the SPSM proposed by Chortareas and Kapetanios (2009) can clearly identify how many and which series in the panel are stationary processes by classifying a whole panel into a group of stationary and nonstationary series. The empirical results from several panel-based, as well as standard pure time-series, unit-root tests, indicate that house prices for the nine provinces studied here are either stationary or nonstationary. However, results from the SPSM using the panel version of the Kapetanios et al. (KSS, 2003) test with a Fourier function unequivocally indicate that house prices are stationary for the nine provinces under study. Our test results have important economic and policy implications for South Africa.

Suggested Citation

  • Tsangyao Chang & Tsung-Pao Wu & Rangan Gupta, 2015. "Are house prices in South Africa really nonstationary? Evidence from SPSM-based panel KSS test with a Fourier function," Applied Economics, Taylor & Francis Journals, vol. 47(1), pages 32-53, January.
    • Handle: RePEc:taf:applec:v:47:y:2015:i:1:p:32-53
    DOI: 10.1080/00036846.2014.959657
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    Cited by:

    1. Geoffrey Ngene & Charles Lambert & Ali Darrat, 2015. "Testing Long Memory in the Presence of Structural Breaks: An Application to Regional and National Housing Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 50(4), pages 465-483, May.
    2. Nicholas Apergis & Tsangyao Chang & Christina Christou & Rangan Gupta, 2017. "Convergence of Health Care Expenditures Across the US States: A Reconsideration," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 133(1), pages 303-316, August.
    3. Xolisa Vayi & Andrew Phiri, 2018. "A sequential panel selection approach to cointegration analysis: An application to Wagner’s law for South Africa," Working Papers 1831, Department of Economics, Nelson Mandela University.
    4. Tristan D. Skolrud, 2017. "Reducing Approximation Error in the Fourier Flexible Functional Form," Econometrics, MDPI, vol. 5(4), pages 1-16, December.
    5. Tsangyao CHANG & Yifei CAI & Wen-Yi CHEN, 2017. "Are Suicide Rate Fluctuations Transitory or Permanent? Panel KSS Unit Root Test with a Fourier Function through the Sequential Panel Selection Method," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 5-17, September.
    6. Xolisa Vayi & Andrew Phiri, 2018. "A Sequential Panel Selection Approach to Cointegration Analysis: An Application to Wagner’s Law for South African Provincial Data," Economic Research Guardian, Weissberg Publishing, vol. 8(1), pages 25-39, June.

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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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