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Causality between housing returns, inflation and economic growth with endogenous breaks

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  • T. Thanh-Binh Nguyen
  • Kuan-Min Wang
Abstract
This paper investigates the housing-macroeconomic nexus in Taiwan with endogenous structural breaks during 1991-2006. GDP and CPI are taken into consideration for examining the inflation hedging ability of Taiwan's housing returns and the contribution of the housing market to economic growth. The empirical results show that the growth of GDP actually affects inflation, but it does not cause the growth in housing returns. In particular, when taking the time trend into account, it is found that the effect of inflation on housing returns is negative and the effect of housing returns on inflation is positive. This evidence demonstrates the ineffectiveness of inflation hedging of Taiwan's housing during the period of study and the opportunistic characteristic of investors. In addition, the growth of the housing market is not beneficial for economic growth in the long-run, yet it leads to higher inflation in the short-run.

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  • T. Thanh-Binh Nguyen & Kuan-Min Wang, 2010. "Causality between housing returns, inflation and economic growth with endogenous breaks," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 8(1), pages 95-115.
    • Handle: RePEc:taf:jocebs:v:8:y:2010:i:1:p:95-115
    DOI: 10.1080/14765280903488397
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    2. Chen-Yin Lee & Pao-Huan Chen & Yen-Kuang Lin, 2021. "An Exploratory Study of the Association between Housing Price Trends and Antidepressant Use in Taiwan: A 10-Year Population-Based Study," IJERPH, MDPI, vol. 18(9), pages 1-17, April.
    3. Pradhan, Rudra P. & Arvin, Mak B. & Bahmani, Sahar, 2015. "Causal nexus between economic growth, inflation, and stock market development: The case of OECD countries," Global Finance Journal, Elsevier, vol. 27(C), pages 98-111.
    4. Themba G. Chirwa & Nicholas M. Odhiambo, 2019. "The nexus between key macroeconomic determinants and economic growth in Zambia: a dynamic multivariate Granger causality linkage," Empirical Economics, Springer, vol. 57(1), pages 301-327, July.
    5. Golpe, Antonio A. & Sánchez-Fuentes, A. Jesus & Vides, José Carlos, 2023. "Fiscal sustainability, monetary policy and economic growth in the Euro Area: In search of the ultimate causal path," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 1026-1045.
    6. Phiri, Andrew, 2013. "Inflation and Economic Growth in Zambia: A Threshold Autoregressive (TAR) Econometric Approach," MPRA Paper 52093, University Library of Munich, Germany.
    7. Trabelsi Ramzi & Jouini Wiem, 2019. "Causality Nexus between Economic Growth, Inflation and Innovation," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 10(1), pages 35-58, March.
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