The Macroeconomic Effects of Housing Price Shocks in Türkiye: A Structural VAR Approach

Abstract

This study empirically examines the dynamic relationships between housing prices and key macroeconomic variables in Türkiye from January 2003 to December 2025, using a six-variable structural vector autoregressive model. The model includes the policy interest rate, M1 money supply, industrial production index, consumer price index, consumption expenditures, and housing price index. The empirical findings reveal three main results. First, the interest rate channel is operative: a monetary policy tightening shock has a statistically significant, cumulative negative effect on housing prices, with no evidence of a price puzzle. Second, a positive housing price shock significantly and permanently raises both consumption expenditures -supporting the wealth effect channel- and consumer price inflation. Third, counterfactual simulations show that the housing price channel amplifies the impact of monetary policy shocks on consumption and inflation. The Central Bank of the Republic of Türkiye does not respond systematically to housing price developments in its monetary policy decisions. These findings underscore the need for macroprudential tools to complement monetary policy in addressing housing market imbalances.