The Effect of Population Aging on Housing Price

This paper investigates Granger causality between population aging and housing price using the time series data of Korea. Old age dependency ratio is used as a measure of aging population, and the causality between population aging and housing price is examined by the Granger causality test using an error correction model. Prior to conducting the causality test, the time-series properties of variables are checked by the unit root and the cointegration tests, and an error correction model is constructed to examine the causal relationship between population aging and housing price. The unit root test result reveals that the variables are stationary after differencing and the cointegration test indicates that there is a cointegrating relationship between population aging and housing price. Following the cointegration test, an error correction model is specified to test for the causal relationship. The Granger causality test using an error correction model reveals strong causality running from population aging to housing price. Empirical results of this paper implies that population aging is useful in forecasting housing price, and prior values of population aging have the ability to predict the future values of housing price in Korea.