Abstract

ARRIETA BARCASNEGRAS, Aquiles. The relationship between capital flows and house prices: the Colombian case. rev. econ. Caribe [online]. 2012, n.10, pp.92-125. ISSN 2011-2106.

This paper aims to test whether capital flows systematically drive the recent rise in housing prices in Colombia. The investigation is done through the lens of the theoretical model in Zanna (1996) and twoVEC models, using macroeconomic variables, are estimated.The results from the analysis of impulse response functions and variance decomposition show that there is weak evidence to accept this hypothesis. It is suggested that the internal conditions associated with increased regulation of the mortgage sector are key to explaining why capital flows do not play as active role as they did in the late 90's. In addition, it is considered that economic fundamentals are the most relevant variables to explain the high values of the residential units in the country for the last time.

Keywords : Capital Flows; Housing Prices; VEC Model.

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