The housing market and agricultural land dynamics: Appraising with Economic Policy Uncertainty Index

• DOI: http://doi.org/10.1002/ijfe.1751
• Date: 01 April 2020
• Published date: 01 April 2020
• Author: Gizem Uzuner,Andrew Adewale Alola

RESEARCH ARTICLE

The housing market and agricultural land dynamics:

Appraising with Economic Policy Uncertainty Index

Andrew Adewale Alola

1

| Gizem Uzuner

2

1

Department of Economics and Finance,

Faculty of Economics, Administrative and

Social Science, Istanbul Gelisim

University, Istanbul, Turkey

2

Department of Economics, Eastern

Mediterranean University, Northern

Cyprus, Famagusta, Turkey

Correspondence

Gizem Uzuner, Department of Economics,

Eastern Mediterranean University, 99628,

Famagusta KKTC, North Cyprus via

Mersin 10, Turkey.

Email: gizem.uzuner@emu.edu.tr

Abstract

Agricultural land is a main component of the environment and ecological sys-

tem. Therefore, this study employs the panel cointegration approach to investi-

gate the dynamic relationship between the housing market vis‐à‐vis housing

price (hp) and agricultural land (land) of a panel of 15 countries (countries with

the gross domestic product–weighted average of the national Economic Policy

Uncertainty index) over the period 1997–2015. Additionally, Granger causality

approach of Dumitrescu–Hurlin is employed for the investigation. The model

adjusts to the long‐run equilibrium with an annual speed of 11% from any sit-

uation of disequilibrium and with elasticities of −3.97 and −0.67, respectively,

for a land and Global Economic Policy Uncertainty (gepu). Meanwhile, the

impact during a 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 concern about effective and sustainable long‐

term policies. Future anomalies of food scarcity and skyrocketing house prices

associated with agricultural land–house price trade‐off challenges could poten-

tially be mitigated by such effective policy frameworks.

KEYWORDS

agricultural land, global economic policy uncertainty, housing prices

JEL CLASSIFICATION

C32; Q15; R31

1|INTRODUCTION

The key message of the World Bank's housing finance

was once “Housing plays a key socio‐economic role and

represents the main wealth of the poor in most developing

countries.”Similarly, the United Nations report (June

2017) also noted that population is an important determi-

nant of the housing market (United Nations, 2017). As

such, it is believed that estimates of about 83 million peo-

ple are globally being added to the annual population

with a 2017 population projection of over 7.6 billion

people. To this light, the projections for 2030, 2050, and

2100 are expected to increase, respectively, to 8.6 billion,

9.8 billion, and 11.2 billion. This contextual and further

study on housing is an obvious motivation that has

triggered the curiosity of researchers in a way to try to

establish linkages. Recently, the housing contextual stud-

ies have previously been attributed to the last financial

crisis that plagued the U.S. economy into recession (and

subsequently the global recession). Beginning from the

Received: 22 November 2018 Revised: 5 January 2019 Accepted: 13 September 2019

DOI: 10.1002/ijfe.1751

Int J Fin Econ. 2019;1–12. © 2019 John Wiley & Sons, Ltd.wileyonlinelibrary.com/journal/ijfe 1

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