Abstract
This study aims to find out whether exchange rate volatility affects real estate domestic house prices in Ghana. To this end, a 32 years secondary data from World Development Indicators (WDI) and data from Real Estate Developers in Ghana are employed for the study. The study employs Autoregressive distributed lags (ARDL) bounds testing of cointegration t o test the null hypothesis that exchange rate volatility has n o impact on real estate housing prices. The study finds that real estate price is cointegrated with remittances, exchange rate and inflation. The long run equilibrium is stable and significant. Exchange rates d o not cause changes in real estate prices in both short and long run. Similarly past prices of real estate d o not have impact on current house prices. Rather, remittances positively cause real estate prices. Inflation on its part has a negative impact on real estate prices. It is therefore concluded that, volatility in the exchange rate between the cedi and other trading currencies does not predict changes in real estate prices.
Highlights
AND RESEARCH OBJECTIVES The relationship between real estate prices and foreign exchange rate has always been an important issue mainly because of the concern about the perceived impact of foreign exchange rate fluctuation on prices of general goods and services in import driven economies
Remittances and real estate prices are all expressed in Ghana Cedis
The study shows that remittances and inflation have a direct impact on prices of residential houses
Summary
AND RESEARCH OBJECTIVES The relationship between real estate prices and foreign exchange rate has always been an important issue mainly because of the concern about the perceived impact of foreign exchange rate fluctuation on prices of general goods and services in import driven economies. High fluctuations in exchange rates can lead to huge losses in an investor’s portfolio of investments due to uncertainty of return on investments. This is due to the fact that movements in foreign exchange rates affect the prices of goods on the local and international markets thereby affecting real estate prices in developing economies
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