Dynamic relationship between the housing prices and selected macroeconomic variables in Kenya
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Date
2018-08
Authors
Njaramba, Stephen Githae
Gachanja, Paul
Mugendi, Charles
Journal Title
Journal ISSN
Volume Title
Publisher
Stratford Peer Reviewed Journals and Book Publishing
Abstract
In Kenya housing prices are considered high and have still continued to rise. This has made housing
affordability and access a preserve of the top income earners. Consequently, large population live in
houses with reduced access to clean water, sanitation, unreliable and unhealthy energy sources, increased
exposure to diseases and low levels of financial security. Arable land is also being converted to
residential centers which is constraining on public goods provision and agricultural output. Housing
prices behavior have been known to influence business cycle dynamics by affecting aggregate
expenditure and also the performance of the financial system through their effect on the profitability and
stability. This study examined the dynamic relationship between housing prices and selected
macroeconomic variables in Kenya. In doing this, the study used time series data for the period 1960 to
2015 and VAR models. The VAR models were selected where Toda and Yamamoto (1995) methodology
was used. This is a modified version of granger causality test based on augmented VAR modeling. The
study findings indicate that the housing prices dynamically relate with the selected macroeconomic
variables. The study therefore concludes that housing prices have a positive contemporaneous impact on
the selected macroeconomic variables indicating the existence of mutually reinforcing cycles between
the housing prices and the selected macroeconomic variables. Therefore, there is need to observe the
housing prices movements to avoid the cost that could result in case of instability in the housing market.
Description
Research Article
Keywords
Housing prices, Macroeconomic Stability, Housing Price Boom, Affordability
Citation
Journal of Economics Volume 2 Issue 1 Page 35- 59 August, 2018