House prices and tourism development in Cyprus: A contemporary perspective

Alola, Andrew and Asongu, Simplice and Alola, Uju (2019): House prices and tourism development in Cyprus: A contemporary perspective. Forthcoming in: Journal of Public Affairs

Abstract

This study investigates the nexus between tourism development and house prices in the Republic of Cyprus over the period spanning from 2005Q1 to 2016Q4. Tourism indicators vis-à-vis tourism arrivals along with other explanatory variables (domestic credit, land area per person, and the consumer price index) are employed in a multivariate Autoregressive Distributed Lag (ARDL)-bound test model. The empirical results indicate a significant evidence of cointegration. Indicatively, an observed adjustment of about 44% from short-run to long-run implies that the model is not relatively slow to adjust to disequilibrium. Importantly, a percent increase in tourism arrivals is observed to cause a rise in house price by about 37%. Expectedly, it is statistically observed that as the land area per person decreases, it is accompanied by a hike in house price. Also, the impacts of domestic credit offered to private enterprises and the consumer price index are different from the results in previous studies. As a policy guide, the government of Cyprus and stakeholders in the tourism and housing sectors should outline a strategy that will ensure the social welfare of people such that housing availability is not hampered by tourism activities.

• Item Type: MPRA Paper
• Language: English
• Keywords: house prices; tourism; domestic credit; cointegration; ARDL; Republic of Cyprus
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; N - Economic History > N5 - Agriculture, Natural Resources, Environment, and Extractive Industries > N50 - General, International, or Comparative; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location > R31 - Housing Supply and Markets

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