On the Dynamic Linkages among Economic Policy Uncertainty, Land Use and Housing Prices: Evidence from Time Series and Panel Data Models

In the first chapter of this thesis, we explore the dynamic relationship between economic policy uncertainty (EPU) and real housing prices in the US, taking into account the potential impact of structural breaks and other covariates on housing prices. The findings suggest the presence of strong time-varying Granger causality from EPU to housing prices with statistically significant tests of various subsamples. A key finding of the study is that strong causality from EPU to housing prices is observed during periods of declining EPU associated with rising housing prices, but not in periods such as the high EPU and declining housing prices. This suggests that lower levels of EPU can help predict real housing prices. This finding is useful for policymakers, real estate agents, and portfolio managers in the housing market who have an interest in predicting the housing market and evaluating its associated risks. In the second chapter, we investigate the dynamic relationships between housing price return and EPU growth by incorporating economic growth and short-term interest rate as additional variables to circumvent for omitted variable bias. Empirical results show that a positive shock to EPU growth leads to a decrease in the housing price return while the same does not hold for the reverse case. Also, the housing price return is observed to have a very weak effect on explaining the changes in EPU growth. Based on these outcomes, several policy directions are constructed for all stakeholders ranging from real estate agents, portfolio managers, and policymakers in the housing market. These policies could be employed to predict the housing market and evaluating its associated risks. In the third strata, the study investigates the asymmetric nexus of agricultural land and housing market vis-à-vis house prices using the Non-linear Autoregressive Distributed Lag (NARDL) approach. The finding notes a significant and positive short and long run relationship between housing prices and agricultural land especially when there is a negative shock on agricultural land. But when there is a negative shock on EPU, the impact on housing prices is significant and negative for both the short-run and long-run. While an asymmetric long-run relationship is significant and positive between EPU and housing prices, such a significant occurrence does not exist for agricultural land. Hence, in meeting housing demand and mitigating an escalated growth in house prices, the implementation of the effective land-use policy is encouraged. The last strand of this thesis employs the panel cointegration approach to investigate the dynamic relationship between the housing market vis-à-vis housing price (hp) and agricultural land (land) of a panel of fifteen countries over the period 1997 to 2015. Additionally, the Granger Causality approach of Dumitrescu-Hurlin is employed for the investigation. Meanwhile, the impact during the short-run of GEPU is statistically significant and positive on hp whereas it is not significant for land. Interestingly, the investigation reveals Granger causality from agricultural land to the housing price with feedback. The research presents an indication that policymaker(s) and urbanization stakeholders should be more concerned about effective and sustainable long-term policies. Future anomalies of food scarcity and skyrocketing house prices associated with agricultural land-house prices trade-off challenges could potentially be mitigated by such effective policy frameworks.