A Causal Study on House Prices and Macroeconomic Indicators

Abstract

The aim of this paper is to explore the relationship between some macroeconomic indicators i.e. exchange rate, money supply, consumer price index and crude oil prices with the real estate industry of United Arab Emirates. From previous study regarding the real estate industry, which could not provide the any strong evidence of relationship between exchange rate volatility and real estate industry. The frequency of the data is monthly and ranged from 2008-2017 which was collected from Thomson Reuters. Moreover, the test applied was augmented dickey fuller test in order to get the stationary data. After that to explore the relationship between the variables, the regression model was used. The major findings of the study are that (1) there is inverse relationship between the oil prices and real estate; (2) the negative relationship between the exchange rate and real estate; (3) positive relationship observed in case of money supply and consumer price index with real estate industry. To best of our knowledge real estate market in UAE have received less attention from researchers. The empirical findings of this study would encourage more researches with different areas of real estate. The research will also help Pakistan to identify the real estate sector and can be recommended to form housing price index for better understanding of investment and the better opportunties in the different areas of real estate. Further, it will help the policy makers of different regions around the globe in the resstrcutring of policies and implenation of the same on both micro and macro level; as the real estate industry plays a vital role in the economy's progress.