The impact of inflation and interest rates on real estate indices in the US and EU

Abstract

This paper investigates the relationship between real estate indices, inflation and interest rates in both Europe and the USA. The main objective is to examine the impact of inflation and interest rates on the respective real estate indices and test specific hypotheses. The study utilizes cointegration analysis to assess the long-term equilibrium and the speed of adjustment between the variables. The analysis reveals the presence of cointegrating relationships in both regions, indicating a long-term equilibrium between the variables The findings support the hypothesis that inflation has a significant and positive impact on the real estate indices in both regions. However, the hypothesis stating a significant and negative impact of interest rates on the indices is not supported.

Keywords

• interest rate
• inflation rate
• real estate indices
• vecm