Behavioral dynamics in Turkish housing market: the roleof inflation

Çiftçi, Muhsi
This study investigates the behavioral effects of money illusioned individuals on the Turkish housing market. When individuals make a decision between buying or renting a house, they compare the monthly burden of buying a house and the rent payment. Although rational individuals make a decision based on real interest rates, the money illusioned agents use real and nominal interest rates interchangeably. Therefore, a potential inflation shock makes them think of real and nominal rates moving together. By amplifying the magnitude of nominal rates, this shock will seemingly increase the cost of buying housing and agents, in turn, decline the housing demand. An empirical investigation shows that a proxy for money illusion is largely explained by inflation itself and proves the existence of money illusioned behaviors in the housing market. Further robustness checks and analysis for market frictions also empower the results.


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The recent global economic crisis and pandemic have shown that housing markets are highly exposed to the prevailing economic and social circumstances. Relevant literature indicates that housing output and transaction volumes were negatively affected during the Covid-19 pandemic. In contrast, price levels displayed variations under different circumstances shaped by demand shifts. Housing affordability conditions also deteriorated and household budgets were squeezed by the high housing cost burden due to the ...
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Using 2002-2006 Household Budget Survey, this thesis investigates the income, consumption and saving dynamics of Turkish households within a life-cycle theory framework by employing cross-sectional analyses and cohort techniques. Cohort techniques are used not only to analyze these variables, but also to investigate the demographics and components of income and consumption. The analyses are deepened by dividing the sample according to the location of the households (urban-rural areas), and significant diffe...
Housing affordability of different income groups in turkey: regional comparison
Aksoy, Esma; Özdemir Sarı, Özgül Burcu; Department of City and Regional Planning (2017)
Housing affordability has been a major topic of interest both for researchers and policy makers in many countries. However, in the Turkish case, research on housing affordability is scarce. The problem of housing has usually been considered as a quantitative deficiency problem in Turkey, and for many decades any other dimension of the problem is neglected. Increasing the housing stock in numbers has always been given priority by the Turkish governments. This tendency to support new housing production has co...
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This study investigates the validity of the real exchange rate-real interest rate differential (RERI) relationship for a sample of twenty-three developing and developed countries. The results based on the Johansen cointegration analysis suggest the validity of the long-run RERI relationship only for a small number of countries including Canada, Italy, Switzerland, Belgium, Chile, Israel and Norway. Real interest rate differentials are found to be positively associated with real exchange rates in the long-ru...
Citation Formats
M. Çiftçi, “Behavioral dynamics in Turkish housing market: the roleof inflation,” Thesis (M.S.) -- Graduate School of Social Sciences. Economics., Middle East Technical University, 2019.