Are house prices guided by fundamentals or speculative factors? An empirical inquiry for India
by Mantu Kumar Mahalik; Hrushikesh Mallick
International Journal of Economic Policy in Emerging Economies (IJEPEE), Vol. 9, No. 1, 2016

Abstract: Using quarterly data from 1995:q1-2013:q4, the study empirically examines the key macro determinants of housing price in India's dwelling market. Employing the tools of vector auto-regression (VAR) model, the results based on variance decomposition suggest that the non-fundamental or speculative factors reflected in historical growth of house price predominantly contribute a larger proportion of house price variation comparing the fundamental economic factors. Among the fundamental factors, it is the real income growth rate which significantly explains the variation in house price. The stock market return, real effective exchange rate and interest rate moderately explain the house price variation in India.

Online publication date: Thu, 25-Feb-2016

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