Does tourism affect house prices in Turkey? Evidence from smooth structural break tests

Abstract

PurposeThe purpose of this study is to examine the impact of tourism activities on house prices in Turkey from January 2010 to March 2020.Design/methodology/approachIt is used newly developed cointegration and causality tests based on Fourier approximation. These methods consider smooth structural breaks and do not need to recognize a priori date number and/or form of breaks.FindingsEmpirical findings show that international tourism activities have a substantial role in the escalation of house prices in Turkey. Findings also indicate a rise in industrial production enhances house prices while the mortgage lending rate exhibits a negative influence on house prices. Additionally, the evidence from Fourier causality tests reveals the unilateral causal linkage from tourism to house prices. This situation also shows that the tourism sector has a substantial role in stabilizing house prices’ rapid rise as a policy implication.Originality/valueAlthough a large number of papers have been analyzing the link between house prices and macroeconomic variables, this study eliminates the lack of papers examining the link between tourism and house prices in Turkey by using the new cointegration and causality methods that consider smooth structural changes.