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DO HOUSE PRICES IN TURKEY FOLLOW EURO AREA TRENDS?: REGIME SWITCHING APPROACH

Year 2019, , 294 - 314, 24.07.2019
https://doi.org/10.14783/maruoneri.594957

Abstract

The purpose of this study is to make a comparative
analysis on the house price trends of
Turkey and Euro Area over the 2003-2016 period. Since the economic interactions
between these regions have a substantial volume, any shocks or booms in a
region might affect the other one. Within this scope, the study attempts to
investigate the house price trends in these economies by applying separated
Regime Switching Models. The findings firstly show that the low regime in
Turkey corresponds to the 2008-2012
period while in the Euro Area it corresponds to the 2006-2013 period. Secondly, the impacts of the potential factors
vary across regions. For Turkey, the interest
rate has a negative significant impact on house prices during both regimes, while
unemployment rate has a negative significant
impact only in the high regime. For the
Euro Area, both interest rate and unemployment rate have a statistically significant, negative impact on
house prices. As for income level, it is observed that for both regimes in
Turkey and the Euro Area, income level
has a positive impact on house prices.
The breakpoints suggest that the prior impacts of the global recession around 2008 firstly appear in Euro Area but firstly ends
in Turkey.

References

  • Abelson, P., Joyeux, R., Milunovich, G. & Chung, D. (2005). Explaining house prices in Australia: 1970–2003. Economic Record, 81, 96-103.
  • Abiad, A. (1999). Early warning systems for currency crises: A Markov-switching approach with application to Southeast Asia. Ph. D. dissertation in Economics, Department of Economics, University of Pennsylvania.
  • Adams, Z. & Füss, R. (2010). Macroeconomic determinants of international housing markets. Journal of Housing Economics, 19(1), 38-50.
  • Agnello, L. & Schuknecht, L. (2011). Booms and busts in housing markets: Determinants and implications. Journal of Housing Economics, 20(3), 171-190.
  • Akkas, M.E. & Sayilgan, G. (2015). Housing prices and mortgage interest rate: Toda-Yamamoto causality test. Journal of Economics, Finance and Accounting, 2(4), 572-583. doi: 10.17261/Pressacademia.2015414369
  • Akseki, U., Catik, A.N. & Gok.B. (2014). A regime-dependent investigation of the impact of macroeconomic variables on the housing market activity in Turkey. Economics Bulletin, 34 (2), 1081-1090.
  • Algieri, B. (2013). House price determinants: Fundamentals and underlying factors. Comparative Economic Studies, 55, 315-341.
  • Alvarez‐Plata, P. & Schrooten, M. (2006). The Argentinean currency crisis: A Markov‐Switching model estimation. The Developing Economies, 44(1), 79-91.
  • Apergis, N. (2003). Housing prices and the macroeconomic factors: Prospects within the European Monetary Union. International Real Estate Review, 6(1), 63-74.
  • Badurlar, İ.Ö. (2008). An Investigation of the relationship between house prices and macroeconomic variables in Turkey. Anadolu University Journal of Social Science, 8(1), 223-238.
  • Barot, B. & Yang, Z. (2002). House prices and housing investment in Sweden and the UK: Econometric analysis for the period 1970–1998. Review of Urban & Regional Development Studies, 14(2), 189-216.
  • Beltratti, A. & Morana, C. (2010). International house prices and macroeconomic fluctuations. Journal of Banking & Finance, 34, 533-545.
  • Bjørnland, C.H. & Jacobsen, D.H. (2010). The role of house prices in the monetary policy transmission mechanism in small open economies. Journal of Financial Stability, 6(1), 218-229. doi: 10.1016/j.jfs.2010.02.001
  • Bulligan, G. (2010). Housing and the macroeconomy: The Italian case. In de Bandt, O., T. Knetsch, J. Peñalosa and F. Zollino (Eds.), Housing Markets in Europe -A Macroeconomic Perspective, Heidelberg: Springer, 19-38.
  • Capozza, D. R., Hendershott, P. H., Mack, C. & Mayer, C. J. (2002). Determinants of real house price dynamics. NBER Working Paper, 9262.
  • Ceron, J. A. & Suarez, J. (2006). Hot and cold housing markets: International evidence. CEPR Discussion Paper, 5411.
  • Ciarlone, A. (2015). House price cycles in emerging economies. Studies in Economics and Finance, 32(1), 17-52.
  • Corradin, S. & Fontana, A. (2013). House price cycles in Europe. ECB Working Paper, 1613.
  • Coskun, Y. (2016). Property prices and investment: An analysis for Turkey. Ömer Halisdemir Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 9(2), 201-217.
  • Coskun, Y., Seven, U., Ertugrul, H. M. & Alp, A. (2017). Housing price dynamics and bubble risk: The case of Turkey. Housing Studies, 1-37, doi:10.1080/02673037.2017.1363378.
  • Demir, C. & Yildirim, M. O. (2017). Convergence in house prices across OECD countries: A panel data analysis. Central European Review of Economic Issues, 20(1), 5-15, doi: 10.7327/cerei.2017.03.01.
  • Dufrénot, G. & Malik, S. (2012). The changing role of house price dynamics over the business cycle. Economic Modelling, 29(5), 1960-1967.
  • Englund, P. & Ioannides, Y. M. (1997). House price dynamics: An international empirical perspective. Journal of Housing Economics, 6(2), 119-136.
  • Fratzscher, M. (2003). On currency crises and contagion. International Journal of Finance & Economics, 8(2), 109-129.
  • Genesove, D. & Mayer, C. (2001). Loss aversion and seller behavior: Evidence from the housing market. Quarterly Journal of Economics, 116(4), 1233-1260.
  • Gupta, R., Andre, C. & Gil-Alana, L. (2015). Comovement in Euro area housing prices: A fractional cointegration approach. Urban Studies, 52(16), 3123-3143.
  • Halicioglu, F. (2007). The demand for new housing in Turkey: An application of the ARDL model. Global Business and Economics Review, 9(1), 62-74.
  • Hamilton, J. D. (1994). Time Series Analysis (Vol. 2). Princeton: Princeton University Press.
  • Hofmann, B. (2004). The determinants of bank credit in industrialized countries: Do property prices matter?. International Finance, 7(2), 203-234.
  • Hepsen, A. & Kalfa, N. (2009). Housing market activity and macroeconomic variables: An analysis of the Turkish dwelling market under the new mortgage system. İstanbul University Journal of the School of Business Administration, 38(1), 38-46.
  • Hiebert, P. & Roma, M. (2010). Relative house price dynamics across euro area and US cities: Convergence or divergence?. ECB Working Paper, 1206. Iacoviello, M. (2005). House prices, borrowing constraints, and monetary policy in the business cycle. American Economic Review, 95(3), 739-764.
  • Jarocinski, M. & Smets, F.R. (2008). House prices and the stance of monetary policy. Federal Reserve Bank of St. Louis Review, 90(4), 339-365.
  • Karakoyun, H. D. & Yildirim, N. (2017). Demand-side factors of housing price increases in Turkey: Blanchard-Quah SVAR model. Business and Economic Horizons, 13(3), 312-332.
  • Kargi, B. (2013). Housing market and economic growth relation: Time series analysis over Turkey (2000-2012). International Journal of Human Sciences, 10(1), 898-924.
  • Kim, S. W. & Bhattacharya, R. (2009). Regional housing prices in the USA: An empirical investigation of nonlinearity. Journal of Real Estate Finance and Economics, 38(4), 443-460.
  • Kishor, N.K. & Marfatia H.A. (2017). The dynamic relationship between housing prices and the macroeconomy: Evidence from OECD countries. Journal of Real Estate Finance and Economics, 54, 237-268, doi: 10.1007/s11146-015-9546-8.
  • Merikas, A., Merika, A., Laopodis, N. & Triantafyllou, A. (2012). House price comovements in the Eurozone economies. European Research Studies, 15(1), 71-98.
  • Muellbauer, J. & Murphy, A. (1997). Booms and busts in the UK housing market. The Economic Journal, 107(445), 1701-1727.
  • Nafeesa, Y. (2015). Trends and convergence in global housing markets. Journal of International Financial Markets, Institutions &Money, 36, 100-112.
  • Nneji, O., Brooks, C. & Ward, C. W. (2013). House price dynamics and their reaction to macroeconomic changes. Economic Modelling, 32, 172-178.
  • Ozturk, N. & Fitoz, E. (2009). The determinants of the housing sector in Turkey: An empirical analysis. ZKU Journal of Social Sciences, 5(10), 21-46.
  • Posedel, P. & Vizek, M. (2010). The nonlinear house price adjustment process in developed and transition countries. Economics Institut Working Paper, 1001.
  • Robstad, O. (2018). House prices, credit, and the effect of monetary policy in Norway: Evidence from structural VAR models. Empirical Economics, 54(2), 461-483.
  • Ricci-Risquete, A., Ramajo, J. & de Castro, F. (2016). Do Spanish fiscal regimes follow the euro-area trends? Evidence from Markov-Switching fiscal rules. Economic Modelling, 59, 484-494.
  • Sari, R., Ewing, T.B. & Aydın, B. (2007). Macroeconomic variables and the housing market in Turkey. Emerging Markets Finance and Trade, 43(5), 5-19.
  • Seslen, T. (2004). Housing price dynamics and household mobility decisions. Presented at USC LUSK/FBE Real Estate Seminar, September 3.
  • Thams, A. (2007). Fiscal policy rules in practice. SFB 649 Discussion Paper, 016.
  • Tsatsaronis, K. & Zhu, H. (2004). What drives housing price dynamics: Cross-country evidence. BIS Quarterly Review, March, 65-78.
  • Vansteenkiste, I. & Hiebert, P. (2011). Do house price developments spillover across euro area countries? Evidence from a global VAR. Journal of Housing Economics, 20(4), 299-314.
  • Vargas-Silva, C. (2008). Monetary policy and the USA housing market: A VAR analysis imposing sign restrictions. Journal of Macroeconomics, 30(3), 977-990, doi:10.1016/j.jmacro.2007.07.004.
  • Yildirim, M. O. & Ivrendi, M. (2017). House prices and the macroeconomic environment In Turkey: The examination of a dynamic relationship. Economic Annals, 62(215), 81-110.
Year 2019, , 294 - 314, 24.07.2019
https://doi.org/10.14783/maruoneri.594957

Abstract

References

  • Abelson, P., Joyeux, R., Milunovich, G. & Chung, D. (2005). Explaining house prices in Australia: 1970–2003. Economic Record, 81, 96-103.
  • Abiad, A. (1999). Early warning systems for currency crises: A Markov-switching approach with application to Southeast Asia. Ph. D. dissertation in Economics, Department of Economics, University of Pennsylvania.
  • Adams, Z. & Füss, R. (2010). Macroeconomic determinants of international housing markets. Journal of Housing Economics, 19(1), 38-50.
  • Agnello, L. & Schuknecht, L. (2011). Booms and busts in housing markets: Determinants and implications. Journal of Housing Economics, 20(3), 171-190.
  • Akkas, M.E. & Sayilgan, G. (2015). Housing prices and mortgage interest rate: Toda-Yamamoto causality test. Journal of Economics, Finance and Accounting, 2(4), 572-583. doi: 10.17261/Pressacademia.2015414369
  • Akseki, U., Catik, A.N. & Gok.B. (2014). A regime-dependent investigation of the impact of macroeconomic variables on the housing market activity in Turkey. Economics Bulletin, 34 (2), 1081-1090.
  • Algieri, B. (2013). House price determinants: Fundamentals and underlying factors. Comparative Economic Studies, 55, 315-341.
  • Alvarez‐Plata, P. & Schrooten, M. (2006). The Argentinean currency crisis: A Markov‐Switching model estimation. The Developing Economies, 44(1), 79-91.
  • Apergis, N. (2003). Housing prices and the macroeconomic factors: Prospects within the European Monetary Union. International Real Estate Review, 6(1), 63-74.
  • Badurlar, İ.Ö. (2008). An Investigation of the relationship between house prices and macroeconomic variables in Turkey. Anadolu University Journal of Social Science, 8(1), 223-238.
  • Barot, B. & Yang, Z. (2002). House prices and housing investment in Sweden and the UK: Econometric analysis for the period 1970–1998. Review of Urban & Regional Development Studies, 14(2), 189-216.
  • Beltratti, A. & Morana, C. (2010). International house prices and macroeconomic fluctuations. Journal of Banking & Finance, 34, 533-545.
  • Bjørnland, C.H. & Jacobsen, D.H. (2010). The role of house prices in the monetary policy transmission mechanism in small open economies. Journal of Financial Stability, 6(1), 218-229. doi: 10.1016/j.jfs.2010.02.001
  • Bulligan, G. (2010). Housing and the macroeconomy: The Italian case. In de Bandt, O., T. Knetsch, J. Peñalosa and F. Zollino (Eds.), Housing Markets in Europe -A Macroeconomic Perspective, Heidelberg: Springer, 19-38.
  • Capozza, D. R., Hendershott, P. H., Mack, C. & Mayer, C. J. (2002). Determinants of real house price dynamics. NBER Working Paper, 9262.
  • Ceron, J. A. & Suarez, J. (2006). Hot and cold housing markets: International evidence. CEPR Discussion Paper, 5411.
  • Ciarlone, A. (2015). House price cycles in emerging economies. Studies in Economics and Finance, 32(1), 17-52.
  • Corradin, S. & Fontana, A. (2013). House price cycles in Europe. ECB Working Paper, 1613.
  • Coskun, Y. (2016). Property prices and investment: An analysis for Turkey. Ömer Halisdemir Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 9(2), 201-217.
  • Coskun, Y., Seven, U., Ertugrul, H. M. & Alp, A. (2017). Housing price dynamics and bubble risk: The case of Turkey. Housing Studies, 1-37, doi:10.1080/02673037.2017.1363378.
  • Demir, C. & Yildirim, M. O. (2017). Convergence in house prices across OECD countries: A panel data analysis. Central European Review of Economic Issues, 20(1), 5-15, doi: 10.7327/cerei.2017.03.01.
  • Dufrénot, G. & Malik, S. (2012). The changing role of house price dynamics over the business cycle. Economic Modelling, 29(5), 1960-1967.
  • Englund, P. & Ioannides, Y. M. (1997). House price dynamics: An international empirical perspective. Journal of Housing Economics, 6(2), 119-136.
  • Fratzscher, M. (2003). On currency crises and contagion. International Journal of Finance & Economics, 8(2), 109-129.
  • Genesove, D. & Mayer, C. (2001). Loss aversion and seller behavior: Evidence from the housing market. Quarterly Journal of Economics, 116(4), 1233-1260.
  • Gupta, R., Andre, C. & Gil-Alana, L. (2015). Comovement in Euro area housing prices: A fractional cointegration approach. Urban Studies, 52(16), 3123-3143.
  • Halicioglu, F. (2007). The demand for new housing in Turkey: An application of the ARDL model. Global Business and Economics Review, 9(1), 62-74.
  • Hamilton, J. D. (1994). Time Series Analysis (Vol. 2). Princeton: Princeton University Press.
  • Hofmann, B. (2004). The determinants of bank credit in industrialized countries: Do property prices matter?. International Finance, 7(2), 203-234.
  • Hepsen, A. & Kalfa, N. (2009). Housing market activity and macroeconomic variables: An analysis of the Turkish dwelling market under the new mortgage system. İstanbul University Journal of the School of Business Administration, 38(1), 38-46.
  • Hiebert, P. & Roma, M. (2010). Relative house price dynamics across euro area and US cities: Convergence or divergence?. ECB Working Paper, 1206. Iacoviello, M. (2005). House prices, borrowing constraints, and monetary policy in the business cycle. American Economic Review, 95(3), 739-764.
  • Jarocinski, M. & Smets, F.R. (2008). House prices and the stance of monetary policy. Federal Reserve Bank of St. Louis Review, 90(4), 339-365.
  • Karakoyun, H. D. & Yildirim, N. (2017). Demand-side factors of housing price increases in Turkey: Blanchard-Quah SVAR model. Business and Economic Horizons, 13(3), 312-332.
  • Kargi, B. (2013). Housing market and economic growth relation: Time series analysis over Turkey (2000-2012). International Journal of Human Sciences, 10(1), 898-924.
  • Kim, S. W. & Bhattacharya, R. (2009). Regional housing prices in the USA: An empirical investigation of nonlinearity. Journal of Real Estate Finance and Economics, 38(4), 443-460.
  • Kishor, N.K. & Marfatia H.A. (2017). The dynamic relationship between housing prices and the macroeconomy: Evidence from OECD countries. Journal of Real Estate Finance and Economics, 54, 237-268, doi: 10.1007/s11146-015-9546-8.
  • Merikas, A., Merika, A., Laopodis, N. & Triantafyllou, A. (2012). House price comovements in the Eurozone economies. European Research Studies, 15(1), 71-98.
  • Muellbauer, J. & Murphy, A. (1997). Booms and busts in the UK housing market. The Economic Journal, 107(445), 1701-1727.
  • Nafeesa, Y. (2015). Trends and convergence in global housing markets. Journal of International Financial Markets, Institutions &Money, 36, 100-112.
  • Nneji, O., Brooks, C. & Ward, C. W. (2013). House price dynamics and their reaction to macroeconomic changes. Economic Modelling, 32, 172-178.
  • Ozturk, N. & Fitoz, E. (2009). The determinants of the housing sector in Turkey: An empirical analysis. ZKU Journal of Social Sciences, 5(10), 21-46.
  • Posedel, P. & Vizek, M. (2010). The nonlinear house price adjustment process in developed and transition countries. Economics Institut Working Paper, 1001.
  • Robstad, O. (2018). House prices, credit, and the effect of monetary policy in Norway: Evidence from structural VAR models. Empirical Economics, 54(2), 461-483.
  • Ricci-Risquete, A., Ramajo, J. & de Castro, F. (2016). Do Spanish fiscal regimes follow the euro-area trends? Evidence from Markov-Switching fiscal rules. Economic Modelling, 59, 484-494.
  • Sari, R., Ewing, T.B. & Aydın, B. (2007). Macroeconomic variables and the housing market in Turkey. Emerging Markets Finance and Trade, 43(5), 5-19.
  • Seslen, T. (2004). Housing price dynamics and household mobility decisions. Presented at USC LUSK/FBE Real Estate Seminar, September 3.
  • Thams, A. (2007). Fiscal policy rules in practice. SFB 649 Discussion Paper, 016.
  • Tsatsaronis, K. & Zhu, H. (2004). What drives housing price dynamics: Cross-country evidence. BIS Quarterly Review, March, 65-78.
  • Vansteenkiste, I. & Hiebert, P. (2011). Do house price developments spillover across euro area countries? Evidence from a global VAR. Journal of Housing Economics, 20(4), 299-314.
  • Vargas-Silva, C. (2008). Monetary policy and the USA housing market: A VAR analysis imposing sign restrictions. Journal of Macroeconomics, 30(3), 977-990, doi:10.1016/j.jmacro.2007.07.004.
  • Yildirim, M. O. & Ivrendi, M. (2017). House prices and the macroeconomic environment In Turkey: The examination of a dynamic relationship. Economic Annals, 62(215), 81-110.
There are 51 citations in total.

Details

Primary Language English
Journal Section Makale Başvuru
Authors

Mustafa Ozan Yıldırım 0000-0001-7982-4181

Raif Cergibozan 0000-0001-7557-5309

Caner Demir 0000-0002-3840-6335

Publication Date July 24, 2019
Published in Issue Year 2019

Cite

APA Yıldırım, M. O., Cergibozan, R., & Demir, C. (2019). DO HOUSE PRICES IN TURKEY FOLLOW EURO AREA TRENDS?: REGIME SWITCHING APPROACH. Öneri Dergisi, 14(52), 294-314. https://doi.org/10.14783/maruoneri.594957

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