Asymmetric Causal Relations Between COVID-19 Economic Supports and Real Estate Price Shocks

The goal of this study is to examine the nature of causal relations between COVID-19 related economic supports and real estate shocks in 58 countries over the period of January 1, 2020 and September 3, 2022. To carry out the research, we first decompose the positive and negative shocks of real estate prices for each country. Second, we apply the wavelet transformation to real estate price index shocks and Oxford COVID-19 Government Response Economic Support Index by using a discrete wavelet transform. Finally, we employ the fractional frequency flexible Fourier form Toda-Yamamoto causality test to obtain the causal relations. The results of the study show that in most countries, COVID-19 economic supports have causal effects on real estate prices. Real estate market reactions differ across different time periods. Most of the asymmetric responses of the market takes place in the medium- and long-term. Our results may provide valuable insights for policymakers to develop appropriate housing policies to create an environment for a stable real estate market and enhance price stability when monitoring real estate market developments.