Modeling the Canadian real estate market

Abstract

This research examines the relationships between the Canadian real estate market and macroeconomic variables. Using vector autoregressive models and Granger causality tests, the study finds the Canadian real estate market is connected to major macroeconomic variables such as the exchange rate of the Canadian dollar against the US dollar, inflation, differences between long-term and short-term rates, and the gross domestic product. However, beyond the effect of real estate on itself only inflation and spread significantly affect the real estate market contemporaneously.