The Relationship between House Prices and Economic Growth in Malaysia: An Empirical Analysis

Abstract

The economy can be affected by movements in housing prices through multiple channels. House prices in Malaysia increased 0.3 percent YoY in March 2021, following a 1.2 percent YoY increase the previous quarter. This current study employs an autoregressive distributed lag model (ARDL) examine the relationship between GDP and housing prices (HPs) in Malaysia. This study is using quarterly data over the period 2011:1 to 2020:4 for the six variables such as gross domestic product (GDP), housing prices (HP), lending rate (LR), exchange rate (EXCHR) and world governance indicators (VAA, PS, GE, RQ, ROL and COC). The results of ARDL cointegration tests running from housing price to GDP provide strong evidence to support the hypothesis that hosing price and economic growth are cointegrated.