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Tuck Cheong Tang and Pei Pei Tan
 
''Real Interest Rate and House Prices in Malaysia: An Empirical Study''
( 2015, Vol. 35 No.1 )
 
 
This study examines the relationship between real interest rate and real house prices in Malaysia. The analysis covers recent quarterly data from 2001 to 2013. The regression results show a negative effect of real interest rate on the Kuala Lumpur house prices, but it is not the case for the remaining five reported states in Peninsular Malaysia. The Granger-causality tests also provide positive findings. The direction of causation is from real interest rate to real MHPI (the Malaysian House Price Indexes). This study supports the ripple effect – the states' house prices are inter-caused, except for Pulau Pinang. These findings are relevant for policy implications.
 
 
Keywords: Causality, Real house prices, Real interest rates, Malaysia
JEL: R2 - Urban, Rural, and Regional Economics: Household Analysis: General
E4 - Money and Interest Rates: General
 
Manuscript Received : Aug 08 2014 Manuscript Accepted : Mar 11 2015

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