Bubbles on the Steppe: Intrinsic Bubbles and Credit Expansion in Kazakhstan's Real Estate Market

61 Pages Posted: 29 Sep 2017 Last revised: 10 Nov 2017

See all articles by Galina A. An

Galina A. An

Kenyon College - Department of Economics

Charles Becker

Duke University - Department of Economics

Enoch Cheng

University of Colorado at Denver - Department of Economics

Date Written: November 17, 2017

Abstract

This paper uses high frequency aggregate housing price data from 2000 through 2017 for the minerals-rich former Soviet republic of Kazakhstan to explore price movements during boom and stagnation cycles. Kazakhstan experienced staggeringly rapid housing price growth at the outset of this period, when real prices for existing housing rose more than ten-fold in a seven-year period. Despite this rise (and subsequent decline by roughly one-third), it appears that bubble components as variously measured were small for new housing, and largely limited to 2002-04. A far larger bubble appears for sales of existing units, but unrecorded renovation expenditures may be pushing this term up. However, co-movement with vast credit expansion leads us to conclude that there is not enough evidence to support the rational speculative bubble model in Kazakhstan during 2000-2017, but we do find evidence for a policy-induced boom. What was not small was the huge rise in real housing wealth (and its likely contribution to aggregate demand) or the roughly 40% rise in housing stock that occurred during 2003-15. We conclude that credit expansion, housing wealth, and housing construction are far more important at least to a class of upper-middle-income countries than is generally appreciated.

Suggested Citation

An, Galina A. and Becker, Charles Maxwell and Cheng, Enoch, Bubbles on the Steppe: Intrinsic Bubbles and Credit Expansion in Kazakhstan's Real Estate Market (November 17, 2017). Economic Research Initiatives at Duke (ERID) Working Paper No. 253. Available at SSRN: https://ssrn.com/abstract=3044009 or http://dx.doi.org/10.2139/ssrn.3044009

Galina A. An

Kenyon College - Department of Economics ( email )

Gambier, OH 43022
United States

Charles Maxwell Becker (Contact Author)

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States

Enoch Cheng

University of Colorado at Denver - Department of Economics ( email )

Campus Box 181
P.O. Box 173364
Denver, CO 80217-3364
United States

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