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  • P-ISSN 1738-656X
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한국개발연구. Vol. 13, No. 3, October 1991, pp. 55-74

https://doi.org/10.23895/kdijep.1991.13.3.55

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Causality between Land Price Increase and Macroeconomic Variables (Written in Korean)

손재영

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Abstract

Despite concerns about rapid land price increases, few attempts have been made to understand its causes and effects, which may justify government intervention or identify policy targets. This paper applies the Granger Causality test to establish causal relationship between the land price increase and several macroeconomic variables. Our tests show that increases in Ml and M2, private construction activities, and stock price index accelerate the land price increase. On the other hand, the increase in land price raises the rate of increase in CPl. WPI and private construction activity; lowers real GNP and GOP rate; and results in higher market interest rates. Many of these findings have obvious explanations, but a few still need further theoretical and empirical investigations. We draw three main conclusions from the analysis. First, the increase in land price cannot be an evidence for the success or failure of microeconomic policy, measures such as land taxation and land use regulations, since it is heavily influenced by macroeconomic variables. Second, the land price increase accelerates inflation, but anti-inflationary policies such as tight monetary policies also stabilize land price. Third, the relationship between the construction activities and the land price increase indicates that construction investments will in the long run, help to stabilize the land price.

JEL Code

E49, C32

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