THE INFLUENCE OF MONETARY POLICY ON HOUSING MARKET: EVIDENCES FROM TURKEY

Abstract

Purpose: Nowadays, the changes in the level of economic activities in the housing market are accepted as the most important signal of macroeconomic performance. This situation brings about the need to give importance to the investigation of policy implementations that affect economic activity in the housing market. So, this study aims to find out the effects of changes in the monetary policy on housing prices in Turkey as a sample of developing country. Design/methodology/approach: This study employed Augmented Vector Autoregression (VAR) analysis. For housing prices; the Housing Unit price series, calculated by the Central Bank, spanning 2010M1-2016M3 are used. Housing unit price is calculated by Housing price per square meter. To represent production volume, the index of total industrial production has been used. To represent inflation series, CPU (Consumer Price Index) series have been used. The data has been taken from CBRT (the Central Bank of the Republic of Turkey) and TUIK (Turkish Statistical Institute). Findings: Results show that policy interest rates are important indicators for the related term?s housing prices and it can also be said that the housing price channel has partially been effective. Accordingly, results determined that monetary policy had a significant effect on housing prices in Turkish housing market. Originality/value: This study supports the argument that monetary policy has a significant effect on housing prices in developing countries like Turkey.