THE IMPACT OF HOUSE PRICES ON CONSUMPTION IN SOUTH AFRICA: EVIDENCE FROM PROVINCIAL-LEVEL PANEL VARs

Beatrice Desiree Simo-Kengne (), Rangan Gupta and Manoel Bittencourt ()

No 201211, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper provides an empirical analysis of the role of house prices in determining the dynamic behaviour of consumption in South Africa using a panel vector autoregression (PVAR) approach to provincial level panel data covering the period of 1996 to 2010. With the shocks being identified using the standard recursive identification scheme, we find that the response of consumption to house prices shock is positive, but short-lived. In addition, we find that a positive shock to house price growth has a positive and significant effect on consumption, while the negative impact of an anticipated house price decrease causes an insignificant reduction in consumption. This suggests that house prices exhibit an asymmetric effect on consumption, with the positive effect following an increase in house prices being dominant in magnitude in comparison to a decline in consumption resulting from a negative shock to house prices.

Keywords: House prices; consumption; panel vector autoregressions (search for similar items in EconPapers)
JEL-codes: C33 E21 E31 R31 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2012-03
New Economics Papers: this item is included in nep-afr and nep-ure
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Citations: View citations in EconPapers (21)

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Journal Article: The Impact of House Prices on Consumption in South Africa: Evidence from Provincial-Level Panel VARs (2013)
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