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The Causal Relationship between House Prices and Economic Growth in the Nine Provinces of South Africa: Evidence from Panel-Granger Causality Tests

Tsangyao Chang (), Beatrice Desiree Simo-Kengne and Rangan Gupta ()

No 201317, Working Papers from University of Pretoria, Department of Economics

Abstract: This paper analyses the causal relationship between housing activity and growth in nine provinces of South Africa for the period 1995-2011, using panel causality analysis, which accounts for cross-section dependency and heterogeneity across provinces. Our empirical results support unidirectional causality running from housing activity to economic growth for most of the provinces studied; bi-directional causality between housing activity and economic growth for Gauteng; and no causality in any direction between housing activity to economic growth in Eastern Cape and KwaZulu-Natal. Our findings provide important insights for housing policies and strategies for South Africa. Specifically, housing sector might be an efficient growth-led instrument for all the provinces except Eastern Cape and KwaZulu-Natal.

Keywords: House Prices; Economic Growth; Dependency and Heterogeneity; Panel Causality Test (search for similar items in EconPapers)
JEL-codes: C33 R11 R12 R31 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2013-04
New Economics Papers: this item is included in nep-afr, nep-fdg and nep-ure
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