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Are House Prices in South Africa Really Non-Stationary? Evidence from SPSM-Based Panel KSS Test with a Fourier Function

Tsangyao Chang (), Tsung-pao Wu () and Rangan Gupta ()
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Tsung-pao Wu: Department of Finance, Feng Chia University, Taichung, Taiwan

No 201324, Working Papers from University of Pretoria, Department of Economics

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 non-stationary 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 non-stationary. 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 9 provinces under study. Our test results have important economic and policy implications for South Africa.

Keywords: House Prices; Panel KSS Unit Root Test; Sequential Panel Selection Method; Non-Stationary (search for similar items in EconPapers)
JEL-codes: C23 R21 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2013-04
New Economics Papers: this item is included in nep-afr and nep-ure
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Journal Article: Are house prices in South Africa really nonstationary? Evidence from SPSM-based panel KSS test with a Fourier function (2015) Downloads
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