Title: The causal relationship between house prices and growth in the nine provinces of South Africa: evidence from panel - Granger causality tests

Authors: Tsangyao Chang; Beatrice D. Simo-Kengne; Rangan Gupta

Addresses: Department of Finance, Feng Chia University, Taichung, Taiwan ' Department of Economics, University of Pretoria, Pretoria, South Africa ' Department of Economics, University of Pretoria, Pretoria, South Africa

Abstract: This paper analyses the causal relationship between housing activity and growth in nine provinces of South Africa for the period 1995-2011, using panel causality analysis, which accounts for cross-section dependency and heterogeneity across provinces. Our empirical results support unidirectional causality running from housing activity to economic growth for most of the provinces studied; bi-directional causality between housing activity and economic growth for Gauteng; and no causality in any direction between housing activity to economic growth in Eastern Cape and KwaZulu-Natal. Our findings provide important insights for housing policies and strategies for South Africa. Specifically, housing sector might be an efficient growth-led instrument for all the provinces except Eastern Cape and KwaZulu-Natal.

Keywords: house prices; economic growth; cross-sectional dependency; cross-sectional heterogeneity; panel causality analysis; sustainability; sustainable development; sustainable economies; South Africa; Granger causality tests; housing activity; housing policies; housing strategies; housing sector.

DOI: 10.1504/IJSE.2014.065389

International Journal of Sustainable Economy, 2014 Vol.6 No.4, pp.345 - 358

Received: 09 Jan 2014
Accepted: 28 Mar 2014

Published online: 23 Oct 2014 *

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