AN ANALYSIS OF MACROECONOMIC DETERMINANTS OF HOUSE PRICE VOLATILITY IN NAMIBIA
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Date
2020-09-23
Authors
KAMATI, KATRINA NAMUTENYA
Journal Title
Journal ISSN
Volume Title
Publisher
UNVERSITY OF NAMIBIA
Abstract
The housing sector plays a significant role in the economy however, house prices are
presumed to be more volatile than other goods and services, because of their high demand.
The aim of this study was to conduct an empirical analysis of the determinants of house
price volatility in Namibia. Moreover, the direction of causality between house price
volatility and the macroeconomic determinants was examined. The ARCH and GARCH
models together with the VAR/VECM approaches were used to analyse quarterly data
from 2007 quarter 1 to 2017 quarter 2. The findings show that house prices in Namibia
are volatile and the volatility is highly persistent. A long run relationship was established
between house price volatility and the macroeconomic determinants. It was further
established that volatility itself, GDP and mortgage loans significantly determine house
price volatility. In addition, a unidirectional causality from GDP and mortgage loans to
house price volatility was found. The IRF analysis showed that shocks to the selected
macroeconomic variables, except the prime lending rate magnify volatility. It was also
confirmed by the VDC analysis that mortgage loans and current volatility are the most
significant variables that explain variation in house price volatility. Policy makers should
therefore monitor macroeconomic factors closely and ensure that the economy is growing
to mitigate the issues of house price volatility.
Description
Macroeconomics
Keywords
House Price Volatility , Macroeconomic Determinants , Namibia