| Abstract: |
This study investigates the nexus between tourism development and house prices
in the Republic of Cyprus over the period spanning from 2005Q1 to 2016Q4.
Tourism indicators vis-à-vis tourism arrivals along with other explanatory
variables (domestic credit, land area per person, and the consumer price
index) are employed in a multivariate Autoregressive Distributed Lag
(ARDL)-bound test model. The empirical results indicate a significant evidence
of cointegration. Indicatively, an observed adjustment of about 44% from
short-run to long-run implies that the model is not relatively slow to adjust
to disequilibrium. Importantly, a percent increase in tourism arrivals is
observed to cause a rise in house price by about 37%. Expectedly, it is
statistically observed that as the land area per person decreases, it is
accompanied by a hike in house price. Also, the impacts of domestic credit
offered to private enterprises and the consumer price index are different from
the results in previous studies. As a policy guide, the government of Cyprus
and stakeholders in the tourism and housing sectors should outline a strategy
that will ensure the social welfare of people such that housing availability
is not hampered by tourism activities. |