The effect of monetary policy on real house price growth in South Africa: A factor-augmented vector autoregression (FAVAR) approach

Rangan Gupta, Marius Jurgilas and Alain Kabundi ()

Economic Modelling, 2010, vol. 27, issue 1, 315-323

Abstract: This paper assesses the impact of monetary policy on real house price growth in South Africa using a factor-augmented vector autoregression (FAVAR), estimated using a large data set comprising of 246 quarterly series over the period 1980:01 to 2006:04. The results based on the impulse response functions indicate that, in general, house price inflation responds negatively to monetary policy shock, but the responses are heterogeneous across the middle-, luxury- and affordable-segments of the housing market. The luxury-, large-middle- and medium-middle-segments are found to respond much more than the small-middle- and the affordable-segments of the housing market. More importantly, we find no evidence of the home price puzzle, observed previously by other studies that analyzed house prices using small-scale models. We put this down to the benefit gained from using a large information set.

Keywords: Monetary; policy; Real; house; price; growth; FAVAR (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (70)

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Working Paper: THE EFFECT OF MONETARY POLICY ON REAL HOUSE PRICE GROWTH IN SOUTH AFRICA: A FACTOR AUGMENTED VECTOR AUTOREGRESSION (FAVAR) APPROACH (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:27:y:2010:i:1:p:315-323

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