• ISSN: 2301-3567 (Print), 2972-3981 (Online)
    • Abbreviated Title: J. Econ. Bus. Manag.
    • Frequency: Quarterly
    • DOI: 10.18178/JOEBM
    • Editor-in-Chief: Prof. Eunjin Hwang
    • Executive Editor: Ms. Fiona Chu
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HOME > Archive > 2018 > Volume 6 Number 4 (Nov. 2018) >
JOEBM 2018 Vol.6(4): 180-184 ISSN: 2301-3567
DOI: 10.18178/joebm.2018.6.4.571

A Bivariate Causality between Economic Growth and Property Price: Hong Kong Evidence

Koon Nam Henry Lee

Abstract— This study aims to investigate the cointegration and causality relationships between gross domestic product and property price in Hong Kong from 1980 to 2017. In contrast to other studies, the cointegration test used is the autoregressive distributed lagged (ARDL) cointegration (bounds testing) approach of Pesaran that based on the estimation of an unrestricted error correction model (UECM) and the causality test is based on non- causality test of Granger. The selection of Pesaran cointegration approaches instead of Johansen approaches address the problem of how to use a relatively small sample data to estimate the long-term relationship and the direction of causality between gross domestic product and property price that faced by many researchers in estimating the cointegrating relationships between gross domestic product and property price. The results of ARDL cointegration tests running from gross domestic product to residential and office property markets and vice versa provide strong evidence to support the hypothesis that the gross domestic product and residential and office properties are cointegrated. The results of Granger non causality test support to the view of wealth and collateral effect that property price has an important causal affect to economic growth in Hong Kong. The empirical results from cointegration and causality tests suggest that the economic growth are better predicted by including the lagged difference values of residential and office property price.

Index Terms— Cointegration approach, Granger non- causality test, economic growth, property price, wealth Effect, collateral effect.

Koon Nam Henry Lee is with the City University of Hong Kong, Hong Kong (e-mail: cmhenry@cityu.edu.hk).

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Cite: Koon Nam Henry Lee, "A Bivariate Causality between Economic Growth and Property Price: Hong Kong Evidence," Journal of Economics, Business and Management vol. 6, no.4, pp. 180-184, 2018.

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