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House prices and tourism development in Cyprus: A contemporary perspective

Andrew Alola, Simplice Asongu () and Uju Alola

MPRA Paper from University Library of Munich, Germany

Abstract: This study investigates the nexus between tourism development and house prices in the Republic of Cyprus over the period spanning from 2005Q1 to 2016Q4. Tourism indicators vis-à-vis tourism arrivals along with other explanatory variables (domestic credit, land area per person, and the consumer price index) are employed in a multivariate Autoregressive Distributed Lag (ARDL)-bound test model. The empirical results indicate a significant evidence of cointegration. Indicatively, an observed adjustment of about 44% from short-run to long-run implies that the model is not relatively slow to adjust to disequilibrium. Importantly, a percent increase in tourism arrivals is observed to cause a rise in house price by about 37%. Expectedly, it is statistically observed that as the land area per person decreases, it is accompanied by a hike in house price. Also, the impacts of domestic credit offered to private enterprises and the consumer price index are different from the results in previous studies. As a policy guide, the government of Cyprus and stakeholders in the tourism and housing sectors should outline a strategy that will ensure the social welfare of people such that housing availability is not hampered by tourism activities.

Keywords: house prices; tourism; domestic credit; cointegration; ARDL; Republic of Cyprus (search for similar items in EconPapers)
JEL-codes: C22 N50 R31 (search for similar items in EconPapers)
Date: 2019-01
New Economics Papers: this item is included in nep-tur and nep-ure
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Working Paper: House prices and tourism development in Cyprus: A contemporary perspective (2019) Downloads
Working Paper: House prices and tourism development in Cyprus: A contemporary perspective (2019) Downloads
Working Paper: House prices and tourism development in Cyprus: A contemporary perspective (2019) Downloads
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